Insurance for buy to let landlords Advice from LettingFocus.com

INSURANCE FOR BUY TO LET LANDLORDS - ADVICE FROM LETTINGFOCUS.COM

LettingFocus.com landlord consultant David Lawrenson explains the basics of buildings insurance, public and employers’ liability and rent guarantee insurance for buy to let property investors. Ask us for more advice.

Property expert David Lawrenson of www.lettingfocus.com says, "Buildings and contents insurance, public liability, employer’s liability, terrorism, legal costs cover, rent guarantee insurance – there are lots of different types of insurance cover. Some provided as standard in landlords’ and buy to let insurance policies and some not."

This complexity has led to the emergence of specialist landlord insurers who understand what cover landlords really require – and the risks of not having it. In this article I take a brief looks at what this means for landlords.

It’s easy to convince yourself that as long as you are careful and take all the necessary steps to protect your investment property, the risk of anything serious happening is low.

Buy to let property is a higher insurance risk

However, letting out a property investment involves a higher insurance risk than is the case with a standard domestic (i.e. non–let) property. And policies vary greatly in terms of cost and cover provided, so it’s important to check what’s covered and compare policies.

As well as buildings and contents insurance there is also public liability, employers' liability, terrorism, legal costs cover, rent guarantee insurance to worry about too. Some of these are provided as standard in landlords’ insurance policies - and some not.

Some specialist buy-to-let mortgage lenders and all the landlords’ associations have specialist home insurance policies designed with the landlord in mind. The various landlords associations have negotiated good deals with leading brokers and members can expect to get discounts of at least 10%.

Some letting agents also offer cover and a search on Google for “landlords insurance” brings up a whopping 62,000 pages.

Property insurance for landlords and buy to let

All sensible landlords will get buildings insurance or if they have a flat, they will make sure they have some buildings cover provided by the freeholder.

Of course, if you have a mortgage, the lender will insist their interest is noted in the policy schedule and it is easy when you are dealing with all the other paperwork that comes with buying a property to take the easy way opt for whatever landlord policy they offer.

However, I’ve found cheaper and better landlords insurance comes from the specialist brokers and typically the premiums from them usually come at about 15% cheaper than the standard landlords’ policy sold by buy to let mortgage lenders.

Robert Graver of landlords insurance brokers Alan Boswell says, “The message for landlords is, don’t just accept the mortgage lender’s policy - shop around -and check what’s covered because there are often large variations.”

Specialist landlords’ home insurance policies often include a flexible amount of contents insurance cover to cater for the wide variation in level of furnishings provided by landlords. The fewer furnishings you have, the less insurance cover you’ll need to purchase and the lower your premium will be.

After all, if you are only providing a limited amount of furnishings why go to the expense of getting a separate standalone contents policy.

It’s worth being clear about what’s covered and what isn’t.

The main insurance risks (or “perils” in insurers jargon) are fire, storm, riot and civil commotion, malicious damage, theft, burst pipes, escape of water, subsidence and loss of rent. Most buildings insurance covers will include an automatic reinstatement of loss following a claim and the cost of hiring an architect, surveyor or consulting engineer.

So what’s not covered?

Well, the most common “get out” is where there has been a “gradually operating cause”

For example, suppose you have a small crack in the rendering on the outside wall of your property. If a strong wind subsequently rips off the rendering, the insurer will reject this because they will argue you did not properly maintain the property.

Each insurer will operate a different policy on unoccupancy because a property that’s unoccupied for greater than say 4 weeks may render cover invalid. Landlords with long unoccupancy periods should expect to pay a premium on top of the normal insurance rate and get someone to check in on the property from time to time.

Loss of rent insurance for landlords

A standard feature in landlord buildings policies is loss of rent and costs arising from the need to re-house a tenant. This is an essential cover and covers the costs of arranging and paying for a tenant to stay in alternative accommodation where a building, following an “insured incident” is unfit for occupation. This is normally limited to 10% of the buildings sum insured.

Public and employers’ liability insurance for buy to let

Landlords should be aware that who is responsible for loss of injury sustained by a third party resulting from the occupation of a building is a bit of a grey area in law. However, you really should have this cover which will be a standard feature in the specialist landlords’ insurance policies.

Check you are covered for at least £2m per claim for legal liabilities to third parties for accidental injury or damage at an insured property. Insurance cover is for anyone carrying out work for you as well as any legal defence costs including criminal proceedings and cover for the costs of having to attend court as a witness.

Other buy to let and landlord insurance covers

As specialist landlord insurers have mushroomed in recent years, so has the availability of other types of cover. Again, landlords need to understand what these are and what’s covered.

About David Lawrenson and Lettingfocus.com

This is just a rough guide to a complex subject which if you get it wrong can cost you a lot of money. For more advice on landlords insurance or rent guarantee insurance please contact me. I’m David Lawrenson from property investment mentors lettingfocus.com.

I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” which is the UK’s top selling property title. The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. Buy it here.

What’s unique about lettingfocus.com is that we offer independent property coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, estate agent or bridging loan financier and do not receive commissions from any of these sources either.

We offer advice both at our seminars and also on a one to one basis. Contact us for more information.

Lawrenson and Lettingfocus.com – Freelance Writer, Speaker and Consultant

I am an independent expert on the UK property market and a well known property investment blogger. I contribute to newspapers and a host of property websites as a freelance property journalist.

I also write for a number of property investment columns in the press and I run a landlords advice service. My work as a property consultant and property speaker also stretches to helping companies such as banks, building societies, housing associations and web portals with their buy to let and property products and services.

You can read more about my buy to let networking programme at my website lettingfocus.com. My next London property investors seminar meeting is coming soon.