Since 2005, owning your own home has become a pipe dream for more and more first time buyers. Unfortunately, with the recession and subsequent property slump of the last few years, buying a property has hit the ‘would be’ homebuyer hard. Banks have tightened their lending criteria and ask for as much as a fifth of the total purchase price as deposit before granting a mortgage. Compound this with much higher lending rates, despite the Bank of England base rate remaining at an all time low since March 2009, and you can see why demand for rented property is surging.
This is all great news for landlords who not only benefit from increased demand but also the opportunity to ask higher rental prices. Naturally, this encourages new buy-to-let landlords onto the market. However, landlords insurance for rental property is not the same as standard buildings and contents insurance so it is important to arrange the correct protection for your investment property. One easy mistake to make is if you decide to let out your own property and move out but keep your household insurance in force. A standard domestic policy will be automatically become void so you must arrange proper landlord insurance.
Landlord insurance is also known as landlords buy to let insurance. Typical buy to let buildings insurance cover would include loss or damage caused by:
Fire, lightning, earthquake, subsidence
Flood and storm damage
Glass and sanitary ware
In addition, and possibly at extra premium, landlord insurance should also cover:
Loss of rent
Suppose you had a serious fire in the property or a leak which forced the tenant to vacate the property. As landlord, you not only have to repair the property but your tenants would need to move into temporary lodgings at your expense and you would lose out on the rental income.
Tenant default and legal expenses
These may include extra expenses related to protecting the property, repossession, default by the tenant, legal defences, disputes over the contract, recovering debts, tax protection, employment disputes (and compensation), and bodily injury.
e.g. a burst pipe, blocked toilet, broken windows.
You could be held liable if your tenant has a case against you for injury resulting from your property. They may claim their loss of earnings and future earnings.
You are liable for damage and injury when you send your own tradesmen to the property.
If the property is let as fully furnished, the contents section of the policy will cover these items including curtains, carpets, white–goods and other appliances. The tenant would need to arrange their own cover for their personal items in the premises.
Where landlords own a portfolio of properties, it is preferable to arrange a combined insurance policy to incorporate all the properties into one policy and, apart from ease of administration, results in discounted rates.