There is no legal requirement for a landlord to have any buildings insurance let alone landlord’s insurance however if the landlord has a mortgage and in particular a buy to let mortgage their lender will require them to have landlords insurance. If you let your property out and you only have standard buildings insurance (having not made your buildings insurance company aware of the fact that you are letting the property out) your insurers are likely to refuse to cover any claim you subsequently make.
Types of Cover
When looking for landlords insurance it is advisable to obtain a policy which covers the following:
Landlords Contents - This is particularly important where the property you are letting out is furnished as it will protect the carpets and all the furniture and other electrical appliances from theft and damage. It is worth noting that tenants rarely look after the landlord’s property as carefully as they look after their own. Even if the property is not let as a furnished property you may still want to insure your carpets and other flooring and other fittings and fixtures.
Landlord liability - Cover against any personal injury claim made by tenant as a result of an accident property. -It is generally advised that the landlord should have at least £2 million cover for legal liabilities to third parties, including tenants, in the event of accidental injury or damage occurring at the property.
Legal expenses insurance - Cover for your legal costs following disputes with tenants this may include repossessing your property and any other disputes with the tenants. A legal expenses insurance policy may be extended to cover legal costs of recovering any outstanding rent owned by the tenant.
Loss of rent insurance - Cover in the event that the property is accidentally damaged or destroyed and cannot be rented out. This is particularly important if you have taken out a large mortgage to buy the property and are relying on the rent to meet the monthly repayments. It will not however cover you in the event of the tenants simply not paying their rent.
Landlord Home Emergency Cover - Covers the costs of arranging emergency repairs for example gas leaks, burst pipes, breaking, pest infestation and so on.
Rent Guarantee Insurance - Provides cover in the event that the tenants fail to pay the rent. This type of cover is becoming increasingly popular however it is a very expensive option and can cost typically 3 to 4% of the rent, however some letting agents will offer this type of cover free if the tenants score highly on their credit reference checks. Good cover should include the legal fees in eviction costs with these and the reference checks a typical policy will cost around £350 to ensure £1000 a month rent over one year-most policies exclude the first month of any claim which may mean that it will not cover the tenants last month’s rent.
Employers Liability Insurance - This will provide cover in the event of claims arising from the death or injury of employees or agents that you employ to manage property. This type of insurance is only likely to be relevant to those that have a number of properties or a particularly large property such that they require for example, grounds and maintenance staff.
Other Insurance Matters to Consider When Letting out a Property:
Double Insurance - If your property is a leasehold property the Freeholder may already be insuring the main structure of the property and you will need to make sure that your landlords insurance does not duplicate such cover as such duplication may cause the insurers not to pay out.
In the event that the Freeholder has insured the main structure of the building you will still need landlord’s liability and loss of rent cover.
Breach of the Lease - If there is a clause in the lease which either prohibits underletting or requires consent of the landlord to let the property out and such consent has not been sought, your insurers may not pay out in the event of claim.
Rehousing of Tenants - Although most policies will pay to rehouse a tenant of the property becomes uninhabitable due to an insured risks such as flooding or fire, the cost of rehousing tenants while, for example, a new is installed will not be covered.
Claims Due to Damage to Neighbouring Properties - Although some policies will cover you for loss of rental income if tenants cannot get access because the damage to neighbouring properties the maximum cover is usually 20% of the property rebuild value.
Types of Tenant - Some insurers will only cover properties with certain types of tenants for example they may provide insurance if the tenants are employed but won’t provide insurance if the tenants are “high risk” tenants such as students, tenants on housing benefit or are asylum seekers. There are Landlord insurance policies available for properties rented to higher risk tenants however they may carry increased excesses and premiums. Issues can occur where the landlord is letting the property to a Local Authority or Housing Association who then sublets to high risk tenants such as asylum seekers and homes people.
Leaving the Property Empty - Some insurers will reject claims of the property has been left empty for more than 30-90 days but may attach conditions to this such as the landlord must inform the insurers of any period where the property is being left empty and if the property is normally let to tenants on benefits the property will need to be checked every 14 days. Typical claims made on buy to let properties that have been left empty are claims for boilers and piping stolen while the property is empty and for flooding due to frozen pipes due to the fact that the heating has been turned off.
Malicious damage - Is often an issue-and many insurers exclude malicious damage or theft by tenants or their guests. Excesses can be between £250 - £2000 on malicious damage claims. Malicious damage may be excluded from cheaper landlord policies and is almost certainly likely to be excluded property is let to high risk tenants such as asylum seekers or those on benefits.