Landlord insurance – a complete guide
As the old adage sagely states, it’s no good shutting the gate once the horse has bolted, which as we all know roughly translates as remembering to cover all eventualities before they happen. Truth is, such an inconvenience/calamity/crisis (delete as applicable) may never actually happen, yet there’s absolutely no harm in pre-empting any possible misdemeanour (however short-term or far-reaching its consequences may be).
Which leads us nicely to landlords and, more specifically, landlord insurance. We believe that landlords should always take out tailored insurance to cover them and their property should something go awry. Not that it’s compulsory. But, and as another famous motto suggests (this time, courtesy of the Scout Association), we should always ‘be prepared’. Burst pipes and subsequent flooding at the property, tenant failing to pay rent being just two potential incidents landlords might have to prepare for at some point.
Unlike for domestically-orientated personal insurance needs, the leading price comparison websites aren’t necessarily the default setting, go-to portal for landlords looking to get a cross-section of quotes from landlord insurance providers; essentially because landlord insurance isn’t a single product as such. More a collection of separate insurances which need to be more bespoke in their compilation and geared toward each landlord’s individual requirements from the outset. An insurance pick n mix if you like. And humans tend to be far better equipped at aggregating elements as opposed to the random selection which computers often throw up.
Landlord Insurance Ensures That You Protect Both Your Property and Income Stream
Which way you choose to approach the subject of dedicated landlord insurance is up to you, but the underlying fact is that landlords really do need insurance policies designed and implemented with the landlord in mind.
The more you think about it, the more it makes perfect sense. Say for example one of the properties you let suffered damage, yet you’d only taken out insurance in your own name as a personal home policy. In this situation there’s every chance that the insurance provider could refuse to pay any claim simply due to them not being aware it was occupied by tenants at the time of the damage incurring, rather than the homeowner.
Therefore it’s imperative that landlords do everything in their power to actively update their landlord insurance providers with accurate and timely revisions to the current circumstances surrounding the property in question. These amendments might include change of tenants and any periods in which the property is empty and is referred to as a ‘void’. The latter information is especially important, as most insurers will not offer cover in the event of a property remaining empty for in excess of 30 days consecutively, unless forewarned.
In terms of the policy make-up itself, a decent landlord insurance package will typically provide cover for the building, loss of rent and the owner’s liability, while additional add-ons such as contents cover, home emergency, legal expenses and rent guarantee insurance can be custom-fit to your particular policy as and when required.
Given that your property is such a valuable commodity, very few landlords would knowingly overlook the vital importance of ensuring that they have buildings insurance in place prior to advertising for tenants. If the homeowner is still in the throes of mortgage payments then the mortgage lender themselves normally stipulate that you have an appropriate buildings insurance actioned as a pre-condition to having your mortgage accepted, irrespective of whether you plan to buy-to-rent. But besides, nobody can realistically leave the prospect of structural or damage to fixtures and fittings to chance when such vast sums of money have been invested in the first instance.
Landlord Insurance is Easy and Straight-Forward to Arrange via Most Household Name Insurance Providers
On this note, it’s worth paying particular attention to the ‘sum insured’ part of any landlord insurance policy drawn up, which for those not in the loop is the maximum amount you can claim if the property is completely destroyed.
If you over-calculate the building’s worth you could easily find yourself paying substantial premiums for cover, while alternatively if you undervalue the property you risk an insurance shortfall.
The golden rule here is that as a homeowner you should always consider the building’s cost should it require reconstruction, and not its current market value. In this instance the policyholder can ask their insurer to make an estimate taking into account crucial factors such as the age and the type of property, or instead seek the advice of a professional to assess the rebuild cost. Having said that, some landlord insurance policies offer unlimited cover, so providing an accurate rebuild value is purely academic.
Other key aspects of a sound landlord insurance policy would incorporate such areas as ‘malicious damage’, ‘contents insurance’ and ‘loss of rent’, all of which should be championed by the landlord during the initial putting together of the documentation and contract.
Malicious damage is self-explanatory in as much as it’s implemented to cover the possibility of disenfranchised tenants causing reckless and premeditated damage to your property (which cover-wise could run to glass, lock and key replacement). Contents insurance should be high on a landlord’s agenda if the house they’re renting out is furnished and will be based on the content’s value in the same way it would be if it was your own domestic and lived-in property.
Even if you’re letting the property unfurnished there’s always the fixtures and fittings to consider insuring, but remember that tenants are responsible for insuring their own possessions either way. Loss of rent clauses are essential if you’re relying heavily on a regular rental income stream to meet the monthly repayments on a sizeable mortgage, as you could easily be left in the lurch if the tenants deemed the building uninhabitable in the direct aftermath of severe damage (structural, fire, flood, etc).
Various Key Landlord Insurance Clauses Should Be Drafted In Your Policy To Safeguard Homeowner Interests
Elsewhere, we would strongly recommend that landlords looked into the not inconsequential matters of ‘home emergency’, ‘landlord’s liabilities’ and ‘rent guarantee’ when having their individual landlord insurance policies drafted.
Home emergency affords the landlord access to a 24-hour helpline for immediate assistance in the unfortunate event of pipes bursting and rendering the property flooded, amongst other core emergency provisions, and grants the homeowner instant contact with qualified tradesmen who will be able to carry out the repairs on site at their first convenience.
However, please bear in mind that home emergency cover is not a substitute for property maintenance and other extra remits which fall to the landlord to maintain and rectify with regards their contractual relationship with their tenants.
As you’re aware, we now live in a ‘where there’s blame, there’s a claim’ culture (rightly or wrongly), so if a tenant should injure themselves on faulty wires or broken floor tiles whilst living in rented property then they are entitled by law to sue the landlord for damages. What’s more, the same applies if an employee injured themselves during work carried out on your property, so landlord liability clauses are generally seen as critical cover to have written into your policy. With liability cover normally available up to £2 million, it provides further peace of mind.
Rent guarantee insurance protects the landlord should a tenant fail to pay their rent, as evicting a repeat non-paying tenant can be a lengthy and costly practice as you are obliged to adhere to the correct legal procedure in this case.
All the time you are effectively losing a regular source of income as well, remember. Over a pre-agreed period, rent guarantee insurance covers the landlord up to a certain value and represents a financial lifeline during what can become a very difficult passage of time for all parties. In addition, rent guarantee insurance also envelopes legal costs, should the dispute require solicitors and the courts.
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