Landlords Insurance
What is it?
Why do you need it?
When do you need it?
What's included?
How can I reduce the cost?
What is Portfolio Insurance?
What is a Block Policy?
What is Legal Expenses Cover?
What is Rent Guarantee?
What is it?
If you own a property you are letting to a tenant, regardless of it being a family member or a stranger, you are a landlord and require a landlord's insurance policy. This is a legal requirement. A standard Home Insurance policy will not suffice.
Why you need it?
There are several reasons, the main ones being:
- If you have a mortgage on the property the Mortgage Provider will stipulate you have adequate cover in place to cover at least the building itself. If you do not then you will be in contravention to the terms and conditions of your mortgage.
- If your tenant were to suffer any injury or loss they may pursue you for damages. Landlords Insurance automatically includes Legal Liability cover to protect you from such events.
- If the property, or any person in the property, suffers damage due to an electrical fault, for example, you could in some instances find yourself prosecuted. Even though you do not live in the property you still own it which makes you liable. Again Legal Liability will protect you against this.
Example: An electrical fire caused by faulty wiring to a plug socket. The fire destroys the property, all of your tenant's contents, and they suffer smoke inhalation. The house adjoining suffers smoke damage and the occupants of that property emotional distress, and to top it off the adjoining walls suffered structural damage.
The Property owner is liable for the electrical set up in the property, NOT the tenant.
As the property owner does not occupy the property a standard policy would be void. If you have the correct Landlords Insurance - your landlord's Legal Liability would cover all compensations and damages for the tenants and the occupants of the house next door, including material loss and repairs to the adjoining house up to £2m. The Buildings Insurance would pay for the re-build your property itself.
From this example you can see that even if you have a relative in the property who would perhaps not sue you, you must consider your liability to others visiting the property and those in the surrounding area (even pedestrians walking by), along with nearby property which does not belong to you.
When do I need it?
Your Landlords Insurance should be in place from the moment you take ownership of the property, ie the exchange of contracts.
What's included?
Everything you need. Landlords Insurance is basically the same as your own home insurance except with the added Legal Liability. It will also take into account the fact that you are not living there which, on a standard Home Insurance Policy, is a requirement.
How can I reduce the cost?
There is no reason for the costs to be expensive in the first place but there are certain things you can do to help keep the cost down. Some quick tips are
- Carefully choosing the right tenants will help. Some insurers will require adequate tenant referencing, and your agent should be able to advise you on this. Students, Asylum Seekers, Families claiming benefits and Immigrants are the most expensive tenant's to insure. Working people are the most cost effective tenants. Insurance companies consider working people less risky and reduce premiums accordingly.
- There is no need to over insure yourself, do you really need to include Landlords Contents Insurance when the only contents belonging to you are the carpets? Carpets can be replaced relatively cheaply, and accidental damage to the carpets (staining) is unlikely to be covered anyway.
- Take an adequate deposit from your tenant to ensure that if the few contents you have are damaged you can recover the loss by withholding their deposit instead of destroying your no claims bonuses and claiming on your insurance.
- If your property is fully furnished you will need some contents insurance – keep the value of these contents minimal and realistic, your tenant will never look after your belongings as well as you would, again on fully furnished properties your tenant should expect to pay a much higher deposit.
Portfolio Insurance
A landlord with several properties. You may wish to insure them all under 1 policy, or you may have a policy per property – which ever you prefer…An advisor will be happy to help you make a cost effective decision if you are unsure.
Block Policy
If you have a building divided up into flats, or a business in the building with a flat included you may need a block policy. You can have separate policies for each concern, but if there are any communal corridors, or living area’s you must have a block policy. Your advisor can update you on your insurance needs here if you are unsure.
Legal Expenses
This is not to be confused with Legal Liability. Legal Expenses is for you personally, in case you feel the need to take up a legal suite against an individual or company – for example an employment tribunal. This legal protection is not restricted to the landlord/tenant aspect of the insurance policy – it is a separate feature for the policy holder.
Rent Guarantee
It's possible to combine your Landlords Insurance with some Rent Guarantee as well. This means the Insurance Company will take over your rent payments if your tenant fails to pay, at the same time, the Insurance Company will actively start the ball rolling to evict your tenant (if you so wish) with a £50,000 Legal fee allowance which will come as part of the package with Rent Guarantee policies.
This type of protection is best suited to Landlords with a mortgage on the property, if the tenant doesn't pay the mortgage company will still want their money on time. It can be pricey, but defiantly worth it – as a Landlord you would have no risk at all from letting your property to a stranger.
What do I do next?
Home Shield Insurance Services Ltd are a broker geared towards Landlords, we offer a wide range of products which can be tailored to suit your specific requirements, all within your budget. Speak to an advisor if you would like advice on how to protect yourself most wisely and cost effectively.
We only offer products from the leading UK Insurers, guaranteeing you a brand policy with a name you can trust.
