Landlord Insurance Guide
As a landlord, there is a mind-boggling choice of insurance products and providers available to help you to safeguard your investment. Much like any insurance, you hope never to need to use it but, when you do need it, you will be glad that you had it!
Not all insurance is compulsory for landlords, so it is worth considering the risks that you may encounter as a landlord and assessing what impact each event would have on you and your income. Some of the risks can also be managed in ways other than by insurance in isolation – that’s really our job – to find you tenants that present you with the lowest potential risk. That said, we can only lower potential risk – regrettably, we can’t remove it completely and accidents can happen!
We always take a damage deposit from tenants before they move into a property, which is usually the equivalent of 6 weeks’ rent – this is enough to keep tenants engaged in taking good care of your property as they are entitled to receive this money back at the end of the tenancy, providing the property is returned in good order (subject to fair wear & tear). However, you should consider that 6 weeks’ rent wouldn’t be enough to cover major incidents in the property should they occur.
Click here for advice on reducing void periods, property damage and rent arrears.
What Insurance Should I Consider?
When letting your property you are (in the eyes of the law) engaging in a business activity – this means that rules and regulations that apply to businesses may also apply to you. Primarily, this means that you won’t be able to maintain a regular buildings’ insurance policy as you would have on the property that you own and live in.
For advice from our property investment expert click here to ask Antony, our specialist dedicated to getting the most out of your property investments.
Landlords’ Buildings Insurance
A vital distinction in a landlord’s buildings insurance policy will be that you will have cover for liability, both as an owner and as an employer, plus the cost to rebuild the property in the event of a total loss. Also, specialist landlord cover will usually allow for longer void periods (gaps between tenancies), the cost of rehousing tenants in the event the property becomes uninhabitable and also for tenant-related incidents such as malicious damage or theft from non-forced entry.
We can help you reduce void periods, property damage and rent arrears. Click here for advice on getting the best out of your investment.
Usually, landlords’ buildings insurance can be extended to also cover your contents in the property. Even if your property will be unfurnished this is important to have as this will cover fixtures & fittings (kitchen, bathroom, flooring, etc.). Making sure this cover is on a new-for-old basis will ensure that there isn’t a shortfall in the event of a claim.
Quite often there are also optional extras to consider, such as emergency call-out cover, boiler breakdown and even rent protection – although, these are typically more specialised in nature and we will cover them later on.
If your property is subject to a mortgage it will be a condition of the lender that you have adequate cover in place. It’s a very competitive marketplace so it’s well worth shopping around to make sure you have the best cover possible – we work with one of the biggest providers of specialist landlord insurance to ensure our landlords have their investments protected, and would be happy to arrange for them to call you to discuss your needs fully.
If you have any questions about Insurance, please go to our contact form and we will be happy to help.
In the event that your property already has buildings insurance, which is often the case with leasehold properties, you can take out contents-only insurance. This works the same way as described previously above.
If your property is situated in a block you should ensure that the cover is adequate and that the freeholder/agent managing the freehold will be able to adequately manage any issues. A relatively common issue in blocks of flats and apartments is water leaking from one flat into the one below. In these cases the block policy can usually be used to fix the issue and then make good – however this wouldn’t usually extend to replacing any damaged possessions or furniture, etc., which is where the additional contents insurance would come into play. In these situations it’s important for the tenants to also have adequate cover to protect their own belonging as you are not able to insure an asset belonging to a third party.
For out more about buildings and contents insurance.
This is an area that we feel very strongly about. Yes, we always do our very best to find the best possible tenants for you – in fact, we work really hard to give you a choice of the best candidates. But even then, the referencing is only accurate at the point in time at which it is completed. It is our experience that, when tenants fall behind with their rental payments, it isn’t often a malicious act – it’s usually due to a significant change in circumstances, for example, illness or loss of work. These things are virtually impossible to predict, so having rent protection in place will give you peace of mind that your rental income is safeguarded.
Not all rent protection is the same. We work with Homelet, to offer Rent Protect Plus which covers more than loss of rent. The cover also extends to the legal costs in gaining back possession of the property for reasons other than just non-payment of rent. It also has a zero excess where often the first month rent owed is taken by the insurer. One of the main reasons we think this cover is great is that Homelet also reference our tenants – so they have a vested interest in ensuring only the best candidates are recommended.
With the current cost of recovering possession of a property running into thousands of pounds in addition to any rent arrears owed, the average total cost now sits between £3,000 to £5000 – could you afford to be without this peace of mind for as little as 2.7% (inc. VAT) of your monthly rental income?
Service contracts are not always considered by landlords as a main priority when looking at managing their risk exposure. Indeed, in our experience, fewer landlords take out this type of cover than do – however, that doesn’t mean that you shouldn’t seriously consider it.
Most commonly, service contracts offer peace of mind by offering breakdown cover to key components in the rental property. The cost for this type of cover varies quite substantially, depending on the level of cover (parts/labour), excess and items covered. Essentially, you can take out cover ranging from a high-risk item (eg., central heating boiler) to your entire house, including:
- Central Heating Boiler/system
- Specific appliances eg., Oven, Hob, Gas Fire etc.
- Emergency Call-Out (Leaks, Broken window, lock changes etc.)
Most commonly, these policies are taken to cover central heating boiler breakdown – which, given the potential cost to repair, is a good way to ensure the cost is spread evenly.
There are several providers of this type of cover: British Gas, Homeserve, Swale, Corgi, SSE, 24/7 Home Rescue, Scottish Power. Each have their own offering and differing levels of cover.
As with all of the above, the peace of mind that these products offer comes with a price tag. The good news there is that, on the whole, these costs can be offset against your tax liability from income received. For more information on this, please see our Landlord Tax Guide.
If you have any questions in relation to this or any other lettings related matters please go to our contact form and we will be happy to help.