Importance of the Correct Landlord Insurance
Like any businessman, one of the critical things for any landlord is the proper landlord insurance. Failure to do this on any level could prove to be a very costly mistake. As a landlord you are running a property business. As such your main asset is your buy-to-let investment. It is vital therefore that you safeguard the value of your property investment should disaster ever strike with the correct landlord insurance.
Do I need specialist landlord insurance?
Because of the nature of buy-to-let property, it is imperative that you have specialist landlord insurance. This is because household policies offer no cover for buildings, contents and landlord's (property owner's) third party liabilities whilst the property is being let out.
Things to watch out for with landlord insurance.
There are a few things that the novice or first time landlord should do when insuring their property with landlord insurance.
1. Make sure that your landlord insurance policy includes employers' liability cover. Most landlords will not think they need to be insured for this, but if you engage anyone to do work on a labour only basis (i.e. they do not supply their own materials) and especially if you pay them in cash, it is likely you will be regarded as their employer in the event of them being injured whilst working on your property. It is also worth mentioning that insurance for employers' liability is compulsory by law so if you are deemed to have employed someone you could also have a criminal prosecution for not being properly insured as a landlord.
2. Don't be tempted to under-insure - if you do you might save a few quid on your landlord's insurance but if disaster strikes you could be out of pocket by tens of thousands of pounds. That risk reward ratio just isn't worth it!
3. Check the level of your landlord insurance excess. This is the amount of the claim that you are required to pay. It effectively controls the viability of small claims. The larger the level of excess generally the cheaper the landlord insurance policy. However, landlords should avoid going for too high an excess on their landlord insurance as this will effectively preclude making a claim for many of the small more numerous items on their Landlord Insurance policy. An excess of around £100 is ideal.
4. Most landlord insurance companies automatically index-link your policy to make sure that your reinstatement value is maintained in subsequent years. It is worth checking this when you take the landlord insurance policy out.
5. An injury claim from your tenant, visitor or member of the public is potentially the most serious event that could befall a property owner. You therefore need to ensure that you have adequate landlord insurance cover, for example an incident involving carbon monoxide poisoning.
What does my landlord insurance actually cover?
Landlord property insurance has two elements to it. The bulk of any premium relates to insuring the structure of the building. Many landlords let property part-furnished; that is to say with floor coverings, curtains/blinds, fixtures and fittings and "white goods" in the kitchen.
Most landlord insurance policies include items such as: carpets, laminate flooring, kitchens, bathrooms, white goods, light fittings and curtains. It is always worth checking that this is the case, otherwise it may be necessary to take out additional landlord insurance cover for the contents. This needs to be factored into the overall landlord insurance cost when comparing prices. Items such as furniture are not classed as fixtures and fittings and will need separate cover . Landlord insurance policies will normally replace items on a 'new for old' basis.
It is worth noting that there is normally a clause in the landlord insurance policy in which states that a loss will only be covered if there has been 'forcible or violent entry or exit'. Therefore a landlord insurance policy will only protect you against damage by the tenants and not property theft. This is why having an adequate tenancy deposit is vital.
Finally, check that the landlord insurance policy has some provision for cover against accidental breakage of sanitary fittings and fixed glass such as windows as these are one of the most common areas of damage.
How much should I insure my rental property for?
The level of landlord insurance buildings cover that you need will depends on the rebuilding cost of your rental property. It's possible to carry out a pretty accurate estimation of this using the Building Cost Information Service (BCIS), part of the RICS. This calculator takes account of the area that the building is in, the type of property and its' construction and will then generate a reinstatement value on which to base the level of landlord insurance you require.
Where to go to get landlord insurance cover?
There is now a huge range of landlord insurance brokers offering buy-to-let insurance. Many have sprung up in recent years that cater for the rising demand from increasing numbers of landlords wanting insurance. The reality is that there is not a huge difference between the landlord insurance cover offered.
This is because ostensibly there are three or four landlord insurance companies that actually underwrite the landlord insurance policies. The main differences come in the form of price and quality of service of the landlord insurance. One of the beauties but also the drawback of the Internet is that it proffers a huge choice of landlords insurance.
However with this comes the ability of landlord insurance providers to differentiate their landlord insurance products by selling the same landlord insurance product through different channels at often markedly different prices. They do this because they know that they will catch out a certain percentage of consumers that massively over pay due to inexperience or inadequate research.
I would always strongly urge landlords to compare as many rates a possible to ensure the best deal on their landlord insurance.
Property Hawk is a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. The site also provides Special Discounted Landlord Insurance. and has an extensive Landlord Insurance Directory
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