Working with the profession to simplify the language of insurance

LANDLORD INSURANCE MADE SIMPLE

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PROTECT YOUR ASSETSThere's more to being a landlord than earning rent. You need to juggle lots of things – changing regulations and legislation, correct documentation, finding tenants, dealing with their problems and ensuring they pay their rent.

It's time-consuming, so it’s easy to overlook landlord insurance. But it’s vital for anyone renting out property. Even with the best tenants, things can go wrong – and cost you a lot of money.

Arranging landlord insurance protects your investment. Here's what you need to know…

What is landlord insurance?Landlord insurance offers wide-ranging protection against potential financial losses. Things like paying to repair storm damage, or the cost of defending against a tenant’s claim against you. And remember, these losses affect professional landlords as well as people generating second incomes by renting their homes out.

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CLAIM

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Isn’t landlord insurance just the same as home insurance?In a word, no. Standard home insurance is not suitable for landlords. If you just take out home insurance in your own name, without telling your insurer you’re letting out your property, the insurance company will probably reject any claim, leaving you out of pocket.

Landlord insurance is designed to provide the additional protection you need when letting out property, as opposed to simply living in it. For example, it can cover loss of rental income if your property becomes uninhabitable due to fire or flood.

Did you know: Many landlords new to letting a property don’t realise they need specialist insurance. In fact, 57% of landlords in the UK don’t have the right cover, believing a normal home insurance policy is sufficient.*

*Source: comparethemarket.com/home-insurance/landlord/

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Over half of UK landlordshave the wrong cover

Do I really need it?It’s not a legal requirement, but if you have a mortgage on the property you rent out, your bank or building society will most likely insist you at least have buildings insurance.

That said, landlord insurance is probably a good idea. After all, your rented property or properties may be among your biggest assets, and the rent you receive might be a big chunk of your monthly income. And it’s worth remembering that damage to your property is more likely if you rent it out. Even the most considerate tenants probably don’t take care of rented property as if it were their own. Spills and breakages are inevitable, but landlord insurance means you can afford to put things right.

Tip: Make sure you have a tenancy agreement that makes it clear who’s responsible for damage. Many landlords make their tenants responsible for the cost of repairing any damage they cause to the property. And many insist they have tenants’ liability insurance to cover these costs. Don’t forget: It’s important to have an inventory of any contents included in the rental agreement. This should also specify the condition of the property and any fixtures and fittings at the very beginning of a new tenancy.

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What cover is available?Landlord insurance often combines several standard features with options to suit your specific requirements and circumstances.

The basicsMost policies automatically include cover for buildings, public liability and loss of rent:

• Buildings insurance – this covers your property’s basic structure against the cost of repairs to damage caused by things like fire, subsidence, storm, flood and vandalism. The list of such events is usually quite extensive, but always ask your insurance provider or check your policy documents for full details.

• Public liability cover – tenants are increasingly aware of their rights, and prepared to take legal action if things go wrong, so it pays to be aware of your legal liabilities. If, for example, a tenant is injured by faulty wiring, they might sue for compensation. Public liability cover protects you if a tenant or visitor to the property is injured, or if their belongings are damaged and it’s your fault.

Tip: If you rent your property to students or people claiming housing benefit, the university or housing association may ask you to provide cover to a specified amount.

• Loss of rent insurance – this protects you if your property becomes uninhabitable due to damage such as fire or flood, forcing your tenants out and leaving you with no rental income. Without landlord insurance, this scenario can leave you in a serious financial predicament.

The extrasThere’s a wide range of additional covers to consider, depending on your needs. These include:

• Alternative accommodation costs – covers the cost of re-homing your tenants in the event of insured events like flood or fire, or storm damage.

• Keys and locks cover – for replacing locks and keys to your property if they’re stolen. Some insurers cover loss as well as theft. • Contents insurance – if your property is furnished, you need to arrange cover for the items you own – such as furniture, electrical items, pictures and ornaments – against damage by fire, flooding, storm, and so on. Make sure you insure your belongings in a new-for-old basis. You needn't insure your tenants' possessions, though – that's their responsibility.

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Don’t forget: Even if your property is rented as unfurnished, chances are you’ll provide basics such as curtains, carpets, light fittings and kitchen appliances – so you’ll need to arrange cover for these. Some building insurance policies include some contents insurance as standard to cover basic items. This will typically be up to a limit, perhaps £5,000.

• Accidental damage cover – this extends cover for costs arising from events like a tenant spilling nail varnish on a carpet or putting their foot through the ceiling while in the attic. It might be included automatically in your buildings or contents cover, but always check.

• Employers' liability insurance – protects you in the event of the injury or death of any person you employ while they’re working in your property, even on a casual basis. Maybe a cleaner, handy man or gardener, for example. If you employ people, you must have employers’ liability insurance, or you could receive a hefty fine.

• Legal expenses insurance – this is designed to cover costs you incur for legal action when dealing with issues such as disputes with tenants, evicting squatters, repossessing property or defending yourself against criminal action. You can also extend it to cover the costs of recovering overdue or unpaid rent from tenants.

• Emergency cover – for access to a 24-hour helpline for emergency repairs by qualified tradesmen. This can really help if there’s a crisis like a boiler breakdown, or burst pipes. If you don’t employ a managing agent, home emergency cover can be invaluable – but remember, it’s no substitute for ongoing property maintenance.

• Rent guarantee insurance – because tenants don’t always pay their rent. While you have a right to evict a tenant for not paying their rent, the legal process can be lengthy and costly, and in the meantime you’re losing income. Rent guarantee insurance can be a financial lifeline to landlords, but payments are usually limited to a specified amount or period of time. Or both.

Remember: Different insurers offer different policies, so check the summary of cover before you buy to make sure it meets your needs.

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How much buildings cover do I need?The buildings insurance aspect of your landlords insurance covers the cost of rebuilding or repairing your property. When you get a quote for landlord insurance you will usually be asked to supply a ‘sum insured’ for buildings cover – i.e. the maximum amount the insurance company will pay in the event of a claim. Make sure this is enough to cover the cost of rebuilding your property if it’s destroyed irreparably. And don’t forget to include fixtures and fittings.

Base the sum insured figure on the estimated cost of rebuilding from scratch, and remember this is not the same as the market value of the property – or even how much you bought it for. For help with this, try the Building Cost Information Service (BCIS) rebuild calculator: abi.bcis.co.uk.

Tip: For some property types, such as listed buildings, blocks of flats/maisonettes, or properties of unusual construction – it might be wise to arrange a survey to confirm the rebuild cost is accurate.

Some insurers won’t ask for a sum insured. Instead they provide automatic cover up to a set limit. However, it’s still your responsibility to make sure this is enough to cover the full cost of rebuilding your property. If not, most insurers will arrange a more appropriate level of cover for an extra premium.

Look out for policies that offer unlimited cover, so you don’t need to calculate an accurate sum insured rebuild value. askciindy.com

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Landlords insurancecovers the cost of

rebuilding your property

Keep your insurer up to dateTell your insurer about any changes, including new tenants or any periods when the property is empty. If you don’t, you might find you’re not covered. Buildings insurance usually ceases if a property is empty for more than 30 days (some insurers specify 90), unless by agreement. If your property is going to be empty for a longer period, for example, for renovations or changing tenants, you need to arrange an alternative, specialist unoccupied property insurance policy to maintain adequate cover.

How much will I pay?Premiums for landlord insurance vary according to several factors, including property location, type and construction, plus the number of tenants, buildings and sum insured, any extras you add to your policy, and your claims history.

It’s important to be as accurate as possible. False or inaccurate information can invalidate your cover.

You might get discounted premiums if you’re an accredited landlord, for security measures such as locks and alarms cover, for building and contents insurance, and any add-ons – as well as for insuring more than one property with the same insurer.

Be choosy with your tenantsThe cost of landlord insurance, and the level of cover available, will vary depending on the type of tenants. Working professionals are typically the most straightforward to insure, and therefore the cheapest. Students and DSS tenants bring associated risks, so premiums tend to be higher.

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• You can reduce your premium by negotiating your excess (the amount you can agree to pay towards any claim). The higher the excess, the lower your premium. But don’t just raise the excess to save money on premiums. Work out a sensible balance.

• Always check the policy small print to see exactly what is and isn’t covered, and get an idea of whether your policy is good value for money.

Did you know?

• All tenant deposits must go into a tenancy deposit protection scheme (TDP). This ensures tenants get their deposits back at the end of a tenancy, subject to the terms of their rental agreement and leaving the property in a good condition.

• Landlords must give 24 hours notice to their tenants if they wish to visually inspect their property for safety issues or damage.

• A leaking pipe can spill over 2,000 gallons of water a day if left unnoticed – that’s an awful lot of damage.*

*Source: gocompare.com/landlord-insurance/

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How to buy the best policy• You can buy cover direct from an insurer, or through an intermediary such as a broker, consultant, bank or building society. Or you can use internet comparison websites to shop around. Landlord insurance is a more ‘niche’ type of insurance than car or home, but there are still plenty of providers competing for your business.

• Don’t buy a policy based solely on price. It's tempting to go for the cheapest policy because renting out property incurs other expenses, and it may be tempting to cut corners here. But however unlikely making a claim may seem now, scrimping on your insurance may prove costly. Choose a policy that offers good value, but most importantly, one that provides the cover you need.

• If you have a mortgage on the property you rent, your lender will probably offer you insurance, but it’s prudent to shop around before deciding which provider to choose.

• Get the right amount of cover. Make sure you don't over or under-insure your belongings or property. You’ll either waste money or risk not having adequate cover if you have to claim.

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Remember if you have any questions about landlord insurance, just ask me, Ciindy at askciindy.com

@askciindy

/AskCiindy

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