by constructaquote - 5 September 2017
Landlord insurance is a crucial consideration for anyone renting out their property. Even if your tenants have good intentions and read well on paper, ultimately things can go wrong. It’s important to have the correct cover in place to protect you from costs of eventualities that could leave you to a loss of rent, damaged property, or injury to your tenants. Having the correct cover in place can give you peace of mind as a landlord as well as peace of mind for the tenant. It can also help to attract tenants to your property that appreciate a responsible Landlord.
If you’re a new Landlord and not sure what insurance you need, this guide will aim to shed some light on the type of policies that are available so you can consider which one is best for you and your property.
Key things to note:
Whilst Landlord insurance is not a legal obligation, a good comprehensive policy will help to safeguard your financial future. It is also a desirable policy to have in place if you’re hoping to attract professional tenants that really care about where they live.
If you’re buying a new property, many banks and building societies will require you to have building insurance as a compulsory condition of your mortgage, especially if you are taking out a buy to let mortgage.
If you already own the property outright, you should still consider landlord building insurance as the most basic and crucial cover for such an asset.
Here are some of the different policies available for Landlords to consider:
Landlord building insurance
Building insurance will usually cover the cost of rebuilding or repairing damage within your property caused as a result of:
Some building insurance cover is unlimited, this means you won’t need to calculate the cost of rebuilding the property if any of the above were to happen, however, some insurers will ask for a rebuild value. It’s important to note that the rebuild value is not necessarily the same as the market value of the property or the price you bought it for. If you are curious as to what the value is, you can use the Building Cost Information Service Rebuild Calculator here. LINK
Building insurance cover can also protect Landlords in the event of malicious damage caused by tenants such as window damage and lock replacement. Some policies can even include loss of rent to the Landlord.
Without this insurance, the Landlord will have to cover the cost of the damage, which is often somewhere in the thousands when it comes to property damage.
Unoccupied property insurance
If your property is unoccupied for at least 30 consecutive days, it is considered, by most insurers, as unoccupied, and therefore makes your standard insurance cover invalid.
This is because properties that are empty are deemed as a higher risk for burglaries, vandalism and weather-related damage due to there being no tenants living there.
For example, if you are planning to do renovation work on your property or there is a time period between a tenant moving out and a new one moving in which is more than 30 consecutive days, unoccupied property insurance will cover the property if any damage occurs.
If any damage occurs within the unoccupied period of time and an unoccupied insurance policy is not in place, the Landlord is liable for the costs of damage caused within this time frame.
Loss of rent insurance
If your property becomes inhabitable and your tenants are forced to move out, loss of rent cover will cover the income lost during this time. Loss of rent insurance is usually included in standard Landlord building insurance.
However, if the property is suitable for living in but you, or your property management service, are unable to find tenants to move in, loss of rent insurance will not cover this type of loss of rent.
Rent guarantee insurance
Rent guarantee insurance is there to provide Landlords with a payment if their tenants default on their rent payments. Even professional tenants can experience a change in financial or work circumstances which results in them being unable to pay their rent.
Most standard rent guarantee insurance includes the recovery of rent arrears paid for a maximum of 5 months out of 6 on both a 6 and 12 month policy. The excess on many rent guarantee policies is equal to one month’s rent. The payments are usually capped and only available for a certain amount of days within an agreed period.
In order for this cover to be valid, there must be a tenancy agreement in place and the tenants must be successfully referenced.
Many people confuse this cover with loss of rent insurance but they are two different types of policies.
Legal expenses insurance
Legal expenses insurance is designed to cover the costs associated with a legal court case involving the landlord and is often part of a bundled policy with rent guarantee insurance. A court case may be required if a dispute arises between a tenant and landlord, if there are issues with squatters, repossessing the property and defence against any criminal action.
In the event of a court case, legal costs can soon reach high amounts. Without legal expenses cover, landlords will be expected to pay for their own legal fees, which can often be very expensive leaving the Landlord in financial difficulty.
Landlord contents insurance
If damage is caused to the items in your property by accident, negligence or miss-use, Landlord content insurance will cover the costs in most circumstances. Content insurance costs vary depending on whether or not your property is furnished or unfurnished. It also depends on the cost of goods within the property.
If your property is furnished, you will need to consider the cost of all items in your property, such as sofas, beds, ornaments, tables and chairs etc. Content insurance only covers the items that you place in the property, not the personal possessions of your tenants.
Even if your property is unfurnished, you should still consider content insurance in the event of damage being caused to white goods, carpets, flooring, curtains and blinds etc. However, some building insurance policies include basic content cover which protects things like carpets and white goods and is typically capped at a certain price, around £5,000 for most policies. This level of cover would usually not be enough to cover the cost of damage within a ‘furnished’ property.
The cost of this cover varies depending on the type of tenant living in your property and the location of your property. Professional tenants tend to be more reliable and respectful of other peoples property and the cover can be less than that of student tenants.
Without contents insurance, the Landlord will have to pay to replace or repair any damage on the contents of the property. In most cases this is in the hundreds and sometimes thousands.
Accidental damage insurance for landlords
Accidental damage insurance covers damage that is not caused by negligence, recklessness or misuse. This type of cover is usually included in a building or content insurance policy.
For example, candle wax melting onto a carpet would be considered as accidental damage and usually would be included in a clause of your content insurance policy and a hole in the wall caused by a furniture delivery would usually be covered under the building insurance policy.
Like contents insurance, if accidental damage is caused and an accidental damage policy is not in place, the landlord will have to pay to repair or replace the damages goods.
Landlord emergency cover
As the name suggests, landlord emergency cover can help you in the event of an emergency situation such as lost house keys, a broken boiler or burst pipes. This type of cover can provide your tenants with 24/7 access to tradesman that will fix the problem without them having to pay. Some policies even cover the cost of temporary alternative accommodation if an issue in your property makes it inhabitable.
Many Tradesmen will require a call out fee and charge for the labour as well as any parts needed to complete the job. This can often be costly, especially if it is out of standard work hours (during the night) in the event of an emergency. Without Landlord emergency cover, the Landlord will have to pay these fees.
Landlord liability insurance
Landlord liability insurance is a policy that all Landlords should seriously consider. In the event of an individuals’ injury, death or illness caused by something in the property, this type of insurance will cover you against the cost of expensive compensation claims and also legal fees.
This cover can protects claims made against tenants as well as individuals working on the property such as tradesmen, handymen, gardeners and cleaners etc.
If you rent your property to individuals on housing benefits, the local authority may require a compulsory minimum level of liability cover. This can also be the case for student tenants as required by the University.
Without liability insurance, should an accident happen on your property, you will be liable for all damages and costs to the victim, legal fees and compensation, as well as costs regarding and damage that was caused or associated with the accident.
Many good quality insurers will include liability insurance as part of the ‘Landlord Insurance’ policy. If it is not included, you should consider it as an additional product to protect you from damaging costs.
Summary
It’s important for landlords to pick a policy that covers them in all eventualities. Make sure your cover includes all of the areas of cover you need or take out additional cover.
Should an issue arise and you do not have the correct cover in place, you could find yourself with expensive claims, legal fees and repair and replacement costs – which can soon reach the thousands. It’s important for Landlords to weigh up the risk of a claim or damage being caused and the potential costs associated over the cost of an insurance premium
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