INSURANCE FOR BUY TO LET LANDLORDS - ADVICE FROM LETTINGFOCUS.COM
LettingFocus.com landlord consultant David Lawrenson explains the basics of landlords buildings insurance, public & employers liability and rent guarantee insurance. Ask us for more advice.
Property expert David Lawrenson of www.LettingFocus.com says, "Buildings and contents insurance, public liability, employer’s liability, terrorism, legal costs cover, rent guarantee insurance – there are lots of different types of landlords insurance cover.
Some are provided as standard in landlords and buy to let insurance policies and some not."
Specialist Landlords Insurance
This complexity of risks facing a landlord has led to the emergence of specialist landlords insurers who understand what kind of insurance cover people letting property really require – and the risks of not having it.
What does this mean for landlords?
It’s easy to convince yourself that as long as you are careful and take all the necessary steps to protect your investment property, the risk of anything serious happening is low.
Buy To Let Property is a Higher Insurance Risk
However, letting out a property investment involves a higher insurance risk than is the case with a standard domestic (i.e. non–let) property. And policies vary greatly in terms of cost and insured cover provided, so it’s important to check what’s covered and compare policies.
As well as landlords property insurance there is also public liability, employers' liability, terrorism, legal costs cover and rent guarantee insurance to worry about too. Most of these are provided as standard in landlords’ insurance policies - but sometimes not.
Some specialist buy-to-let mortgage lenders and all the landlords’ associations have specialist home insurance policies designed with property letting in mind. The various landlords associations have negotiated good deals with leading brokers and members can expect to get discounts of at least 10%.
In my opinion though you'll get better and cheaper cover by going to a specialist broker. See Our Landlords Resources pages for some useful links and deals we have set up with insurers.
Some letting agents also offer cover and a search on Google for “landlords insurance” brings up a whopping 200,000 pages.
Property Insurance for Landlords
Robert Graver of landlords insurance brokers Alan Boswell says, “The message for landlords is don’t just accept the mortgage lender’s policy. Shop around -and check what’s covered because there are often large variations.”
Specialist buy to let insurance policies often include a flexible amount of contents insurance cover to cater for the wide variation in level of furnishings provided by landlords. The fewer furnishings you have, the less insurance cover you’ll need to purchase and the lower your premium will be.
After all, if you are only providing a limited amount of furnishings why go to the expense of getting a separate standalone contents policy.
It’s worth being clear about what’s covered and what isn’t.
The main insurance risks (or “perils” in insurers jargon) are fire, storm, riot and civil commotion, malicious damage, theft, burst pipes, escape of water, subsidence and loss of rent.
Buildings Insurance
Most buildings insurance covers will include an automatic reinstatement of loss following a claim and the cost of hiring an architect, surveyor or consulting engineer.
So what’s not covered?
Well, the most common “get out” is where there has been a “gradually operating cause”
For example, suppose you have a small crack in the rendering on the outside wall of your property. If a strong wind subsequently rips off the rendering, the insurer will reject this because they will argue you did not properly maintain the property.
Each insurer will operate a different policy on unoccupancy because a property that’s unoccupied for greater than say 4 weeks may render cover invalid. Landlords with long unoccupancy periods should expect to pay a premium on top of the normal insurance rate and get someone to check in on the property from time to time.
Loss of Rent Insurance for Landlords
Another standard feature in landlord buildings policies is loss of rent and costs arising from the need to re-house a tenant.
This is an essential cover and covers the costs of arranging and paying for a tenant to stay in alternative accommodation where a building, following an “insured incident” is unfit for occupation.
Landlords should also be aware that who is responsible for loss of injury sustained by a third party resulting from the occupation of a building is a bit of a grey area in law. However, you really should have this cover which will be a standard feature in the specialist landlords’ insurance policies.
Check you are covered for at least £2m per claim for legal liabilities to third parties for accidental injury or damage at an insured property. Insurance cover is for anyone carrying out work for you as well as any legal defence costs including criminal proceedings and cover for the costs of having to attend court as a witness.
Other buy to let and landlord insurance covers
As specialist landlord insurers have mushroomed in recent years, so has the availability of other types of cover. Again, landlords need to understand what these are and what’s covered.
This is just a rough guide to a complex subject which if you get it wrong can cost you a lot of money. For more advice on landlords insurance or rent guarantee insurance please contact me.
For great value landlords insurance products click on Ukinsurancenet. Don't forget to quote our reference code, LFOC to get the best rates from them.
I’m David Lawrenson from property mentors LettingFocus.com.
We offer unbiased information for property investors via seminars and one to one advice. It is unbiased, because unlike most people in the buy to let and property “advice” business we never link to any property company, developer or bridging loan financier.
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