Are you a landlord who is uncertain about what to do regarding landlord insurance?
If you are here’s an article of the things you should be looking for in your landlord insurance policy.
A friend of mine with a rented house was just about to leave for Dubai to teach for a couple of years. He asked me what I did about insuring my properties. I said that I'd used my landlord insurer for a couple of years and had always been pretty happy with them. "Oh" he said. I asked him whom he used. "Nobody" he conceded. "Well it always sees like dead money" he exclaimed.
I can see his point. But I must admit I was a little shocked that anybody could leave their buy-to-let property uninsured given the massive financial loss a landlord could face if the worst happened. Mind you he was an ex accountant so that goes some ways to explaining his reluctance to part with money. My immediate thoughts would be: "what happened if my investment property burnt down?" If you didn't have a valid insurance policy in place the reality would be is that a landlord would be left probably without a building and with a very expensive scorched bit of land!
What does my landlord insurance actually cover?
Some landlords may be tempted just to use their own household insurance to cover their rental property, especially if they are only thinking of renting their property on a temporary basis. This seems fine, except unfortunately most household policies offer no cover for buildings, contents and landlord’s (property owner’s) third party liabilities; while the property is being let out.
Generally landlord insurance policies have two elements to them. The bulk of any expense relates to insuring the structure of the building. Most landlord insurance policies also cover fixtures and fittings, which include such items as: carpets, laminate flooring, kitchens, bathrooms, white goods, light fittings and curtains. This landlord insurance cover is perfectly adequate for most landlords that let out an unfurnished property. It is worth checking that the landlord insurance policy has some provision for cover against accidental breakage of sanitary fittings and fixed glass such as windows as these are one of the most common areas of damage and therefore potential claim on the landlord insurance.
One thing to be aware of with landlord insurance is that theft is only covered if there has been ‘forcible or violent entry or exit’. This effectively excludes the scenario where your tenants decide to “walk off” with your appliances and kitchen as happened to me once. This is why making sure that your tenants have been thoroughly vetted or credit checked and that you the landlord have taken an adequate tenant deposit is vital as any such loss will not be covered by the landlord insurance policy.
It is also possible for landlords to insure separately any contents in the property such as furniture. Again the landlord insurance policy will only protect you against damage by the tenants not property theft.
How much should I insure my investment property for?
The level of landlord insurance buildings cover will depend on a number of factors relating to the rebuilding costs of your investment property. It is possible to carry out a pretty accurate estimation for a landlord insurance quote of this using the Building Cost Information Service (BCIS).
This calculator takes account of the area that the building to be insured is in, the type of property and its’ construction and will then generate a reinstatement value on which to base the level of landlord insurance you require.
Where do professional landlords go for their buy-to-let insurance?
Things to watch out for with landlord insurance:
There are a few things that the novice or first time buy-to-letter should be aware of with landlord insurance:
* Don’t be tempted to under-insure with your landlord insurance – if you do you might save a few quid but if disaster strikes you could be out of pocket by tens of thousands. That risk reward ratio just doesn’t add up!
* Check the level of your excess in the landlord insurance policy. This is the amount of the claim that you are required to pay on your landlord insurance. It effectively controls the viability of small claims. The larger the level of excess on the landlord insurance means generally the cheaper the landlord insurance policy. However, landlords should avoid going for too high an ‘excess’ on their landlord insurance policy as this will effectively preclude making a claim for many of the small more numerous items. An excess of around £100 is normally ideal on landlord insurance. It is possible with certain insurers such as Alan Boswell to ask for a different ‘excess’ in order to reduce your premium.
* Be aware that most landlord insurance policies will exclude theft by the tenant. This means that where the tenant has effectively stolen items or fixtures from your property and done a bunk these may not be covered by your landlord insurance policy. You should ensure that this aspect of any potential loss should be adequately covered by your deposit.
• Most companies will automatically index-link your landlord insurance policy to make sure that your reinstatement value is maintained in subsequent years. It is worth checking this when you take the landlord insurance policy out.
Where to get my landlord insurance?
The Internet is obviously a great place to compare landlord insurance. There are literally hundreds of companies out there all promising the best deals. Happy searching landlords.
Chris writes for propertyhawk.co.uk a site dedicated to UK landlords and free tenancy agreements . Including free online property management software and help with landlord products such as and landlord insurance.
