Before you can begin letting a property, you must secure landlord insurance to protect you over your future leases. This will apply to both residential and commercial buildings. Whilst most wear and tear will be minimal, you need to be covered in case you end up taking on a bad tenant. There are a variety of scenarios which you need to keep in mind and a range of insurance types that you need to be aware of.
What type of insurance do I need?
Most landlord insurance policies will include building insurance and property owners’ liability insurance. From there, you can choose to add on further insurances, depending on your needs. From a legal perspective, landlord insurance is not compulsory. However, it is not advised that you skimp on insurance as it may come back to bite you.
With, here’s a summary of the different types of landlord insurance.
Building Insurance
Building insurance is a policy that covers repairs for physical damage to property. This includes floors, walls, the roof, fixtures and fittings. You can then be covered from damage from fires, flooding, explosions, storms and vandalism.
Content Insurance
If you have chosen to furnish the property with your belongings, you will need content insurance. This covers furniture, appliances and decorative items. Bear in mind that tenants will be responsible for their items. For cover over breaks and spillages, you will need to sort accidental damage insurance separately.
Accidental Damage Insurance
Classed as the damage that occurs suddenly as a result of unexpected and non-deliberate external action, accidental damage insurance covers one-off mishaps within a property. Typically, this can cover accidents involving children and DIY disasters. Incidents involving pets, or infestations, are not usually included in this type of insurance. It is worth checking the finer details of the policy conditions to confirm this.
Property Owners’ Liability Insurance
This type of insurance will offer you protection over claims made against property owners by tenants or visitors. Injuries or damages that could be caused by your property are the most common claims. A good example of this would be a trip caused by a loose tile. Property owners’ liability insurance will cover the financial costs of legal fees and compensation pay-outs.
Legal Expenses Insurance
Legal expenses insurance is designed to cover legal actions undertaken that are not protected by your liability insurance. If you are having major difficulties in evicting tenants or recovering arrears, this insurance would help you cover costs.
Rental Protection Insurance
If you rely on a certain amount of rental income each month, rental protection insurance will cover you if the property suffers damage great enough to make it uninhabitable. The indemnity period is the maximum length of time that ‘loss of rent’ can be claimed. This time frame usually spans 12 months but may vary depending on the insurance provider. Some policies will also support you run into financial difficulties due to tenant arrears.
Emergency Assistance Insurance
This kind of insurance covers repairs that need to be dealt with swiftly. This can include – boilers, plumbing and drainage, home security, power, lost keys, vermin and roof. Whilst this is like some of the other insurance policies mentioned, it differs by focusing on necessities requiring urgent repairs.
Commercial Building Insurance
Specific to commercial landlords, this type of insurance works in the same way as residential building insurance but covers work premises. This covers a variety of commercial spaces not limited to – offices, shops, showrooms and warehouses. Many commercial insurance brokers will provide bundle-type deals where you will be able to get liability and legal insurance alongside.
Factors That Will Affect the Cost of Your Insurance
There are several factors which will contribute to the cost of your landlord insurance:
- Who your tenants are – when securing landlord insurance from a broker they will investigate the occupants of your properties. The insurer may look at their credit history, bank statements and employment history. Factors such as letting to students will generally increase your insurance costs due to the risk of property damage associated with the demographic group.
- Where your properties are – the location of your property will be considered as some areas pose greater risks. As an example, London-based properties will cost more to insure.
- Your insurance history – landlords will also be investigated before a policy cost is determined. If you have had landlord insurance claims rejected in the past you may find it more difficult to secure one in the future.
How Much Should I Consider Spending on Landlord Insurance?
Amongst the maze that is landlord insurance, it’s easy to get confused. This is particularly the case when people try to work out how much they should spend on insurance. Paying too much could slowly drain your savings but too little could leave you struggling if something takes you by surprise.
So where to begin?
Consider Your Preferences
When you sit down to talk with an insurer, they will be able to advise you on what they think you will need. They will also be able to give you a minimum amount that you will be able to ensure the properties with.
However, you may have a gut feeling or personal preference about the available ‘add-ons’. Research your property to understand the building itself and the area it’s based in. This may help guide you towards a decision. If your property is based in a neighbourhood known for vandalism, it’s wise to bump up the building insurance. Similarly, if you are worried about the possibility of empty properties you may want to discuss rental protection insurance in greater detail.
What Is the ‘Sum Insured’?
The sum insured is the maximum amount that the insurance company will pay to rebuild your home if you make a claim. This ties in with contents insurance as it looks at the items within the property. You should calculate the rebuild cost/s to help you work out how much you’re prepared to pay. There are several ways to calculate the rebuild figure. If you have recently bought or mortgaged the property you will be about the find a rebuild cost on the valuation report. Alternatively, you can pay a surveyor to work this out for you or use an online calculator. Doing it yourself online will require you to know the dimensions of the property and some information about its construction. Understandably, you can end up with an unreliable figure from the last method.
Lastly, you will need to make an inventory of the contents of your property. Not only will this help you identify missing and damaged items when inspecting a property, but it’ll help your insurer calculate a reasonable final insurance figure.
How to Buy Landlord Insurance?
Once you’ve gathered all these costs up, you will be able to move forward with choosing a policy feeling informed. There are several ways to buy insurance – through a comparison website, an insurance broker or a financial advisor. Processing an insurance policy does not take long and you will promptly receive a confirmation.
After Purchasing Landlord Insurance
Once your property insurance policy is sorted, there’s not a great deal that you will need to do. If you make any changes to the property, you will need to update your provider, but this can easily be done across the phone. The changes they will need to know about include – if the property becomes empty or if you’re planning significant building work.
How to Make a Claim
If you do need to make a claim, the best thing to do is to contact your insurer immediately. By notifying them in good time you curb the risk of further deterioration which could lead to higher repair costs. They will then request several forms of documentation to support the claim. Generally, they will ask you for a written account of the incident. It can help to provide them with extra documentation such as – receipts, invoices, estimates, photos and videos. How long it will take your insurer to respond will vary but you will be able to find further details in their terms and conditions or help section.
If you’re looking for more useful information, keep an eye on our blog or head over to the Citizens Advice’s website.
