|Landlord Insurance - What's Covered
WHEN it comes to choosing landlord insurance, there are a wide range of policies available to landlords.
From basic building and contents insurance that will pay out, for example, if a tenant leaves the chip fryer on and burns down the kitchen; to policies with optional extras such as liability cover in case a tenant injures themselves as a result of your negligence.
“By renting out a property to a tenant, you are effectively running a business, even if the money you make is small, says Lee Grandin, founder of landlordinsurance.com: “Therefore, it is vital you are adequately covered for all eventualities.
“As a landlord you have a legal responsibility towards your tenant in a way that you do not have for your own home. Landlord insurance covers you for this. A small financial outlay today to purchase a landlord insurance policy could save you a small fortune in the future should the worst happen, he adds.”
Before choosing a landlord insurance policy, consider the type of tenant you have, as this can affect the price of premiums.
Professionals and families are a good bet, while asylum-seekers and multiple occupancies can cost significantly more.
Basic landlord's insurance covers buildings and contents. As a general rule of the thumb it is comparable in price to regular buildings and contents insurance, with a higher excess. Basic policies protect your investment against damage and theft, similar to regular insurance.
In addition to basic landlord insurance there are several optional extras you can include. Such as liability cover that protects you if a tenants suffers as a result of your negligence. You can also take out emergency assistance to cover the immediate cost of repair if your tenant is robbed or suffers a faulty boiler leaking gas. Some insurers even have a 24 hour hotline that will handle the emergency on your behalf.
You might also consider taking out “protection of your rental income”. In the unfortunate event of a fire that leads to you tenants moving out for several months, the policy will not only cover the cost of repairs but also the rent you’ve missed out on.
It is also possible to get “rent guarantee cover” in case tenants refuse to pay. Another option is to take out “legal cover”, which covers the costs of taking your tenants to court to evict them or recover rent. It is worth bearing in mind, however, that in some cases the tenant simply can’t afford to pay you, so it is not always possible to get your rent.
While you can get a policy that covers more than one property, you should always compare joint and single policies to discover which the cheapest one for you is.
Top tips on what to include when taking out landlord insurance: Below is a summary of the typical insurances included in a landlord’s insurance policy.
Property Insurance: The building itself is insured against risks such as flood and fire for the cost or repair or rebuilding. In some cases terrorism or subsidence can be purchased as an optional extra for added security from most insurers.
It is important that when you declare the value of your property you are actually estimating the cost of rebuilding it should it be totally destroyed (known as “total loss” in insurance company speak).
Most insurance companies work out a rate to charge the landlord based on the location of the property and then apply it to the amount specified to rebuild the building (referred to as the “Buildings Sum Insured”).
It is also vital to ensure that you do not underestimate the cost of rebuilding your property. If you have paid a lower premium by underestimating the Buildings Sum Insured, then the insurance company will generally only pay your claims up to the proportion of the building that you have insured.
To illustrate: If your house is worth £100,000 but you only declare a Buildings Sum Insured of £80,000; should you have a claim of £10,000 then the insurer will only pay you £8,000 as they will deem that you under-insured.
Insurers use different ways of assessing the risk of your property and working out the cost of your premiums. As a rule of thumb, these factors include: The location of the property (postcode); the Buildings Sum Insured’ the type of tenants in the property; history of claims; age of the property; type of property (flat, detached, terraced etc; security measures.
Contents: When an insurance company talks about insuring contents on a landlord policy they are not referring to the tenant’s contents.
Insuring such items is the responsibility of the tenant alone and can be done through a mainstream home insurance policy. The contents that can be insured on a landlord’s policy are items in the property that may become damaged such as carpets, sofas, tables, chairs and paintings if the property is rented out furnished.
Many insurers will also insure communal contents such as garden furniture in blocks of flats, or properties with multiple types of tenants.
Landlord Liability: Landlord’s are responsible for the safety of the property their tenants live in.
Should a tenant injure themselves as a result of something dangerous in your property they can make a claim against you for damages.
For example, a tenant may electrocute themselves on a faulty light. The Landlord Liability cover will pay for any damages that are awarded to the tenant as well as all legal costs.
Tenant Default: Should a tenant default on their rent payments, this cover will pay for your financial losses.
Loss of Rent: This policy will cover you for the cost of alternative accommodation or loss of rent should your property become uninhabitable.
Emergency Assistance: All landlords know that calling out a tradesman after hours can leave them seriously out of pocket. If a pipe bursts or a light switch becomes dangerous, the problem will need to be dealt with urgently. Emergency assistance cover will ensure the problem is dealt with immediately so you can take your time and ensure a reliable tradesman is found who can fix the problem at a reasonable price.