Covering All Bases: Why Basic Landlord Building Insurance Should Not be an Option
The vast majority of residential landlords take their responsibilities seriously and take steps to protect their tenants and their property from damage and harm.
This often involves taking out landlord building insurance in the belief that they are then covered for most potential eventualities.
The stark reality is that some policies are simply not adequate enough to cover all bases, and these can leave the landlord exposed to a major financial headache and even a court claim.
The need for insurance
Accidents can and do happen to people and their property on a daily basis, so the need for having proper insurance is there for all to see.
It might be that something like red wine is spilt on a carpet or it could be something like a bath overflowing and causing flood damage. In these sort of eventualities and with events like a burglary for example, you can reasonably expect your buildings insurance policy to cover you for the major part of your financial loss and repairs.
One of the most common scenarios according to some specialist insurance brokers, is that landlords tend to think that they have the right level and type of insurance, only to discover too late, that they donâ€™t.
Landlordâ€™s insurance policies will provide additional layers of protection in addition to the buildings cover, which includes aspects such as public liability cover, legal protection and can also include things like covering against injury claims from tradesmen working at your property and loss of rent insurance.
One of the reasons why you need to seek out a specialist landlord insurance policy rather than a basic one with minimal cover, is the fact that you can add components and features that you need.
If you rent out a property which is either unfurnished or part-furnished, you may not need the contents cover which is included with a lot of basic policies. This means that you are paying for something you may not need or paying for too much cover.
If the tenant is supplying their own furniture, they should be arranging their own contents cover. Adjusting the level of cover required or removing the option altogether, is something you should be able to do through negotiation with your insurance broker or company.
Part of the challenge of being a landlord is that you may occasionally have a tenant who falls behind with the rental payments.
Rent guarantee insurance is becoming increasingly popular with landlords and can provide you with cover if the tenant fails to pay the rent. The cost of arranging this cover will typically be about 3-4% of your rent, but it might be cheaper if the tenant has a high credit score or the letting agent offers it as part of their management fees.
This cover should also allow you to claim for legal fees and eviction costs if you have to remove the tenant from the property. An outlay of about £350 to protect £12,000 of rent over the year, could seem like money well spent when you run into problems, so make sure you ask about cover before you decide on which policy to take.
You also need to check whether your policy covers you for malicious damage to the property, as there are quite a number of landlord policies that do include this type of cover.
Cheaper policies very often exclude this level of cover and any saving you make on the premium could turn out be a false economy, when you find that a tenant or a guest has caused malicious damage at the property.
If you intend to let your property to university students, there will be a period where the property stands empty during the summer when they all go back home.
Some standard policies reject any claims made on properties that have been left empty for more than 30 days, whereas other insurers all a 90 day period, which is particularly important if you are letting to students.
Insurers report that they get a fairly large number of claims for boilers and stolen piping during periods when the property has been unoccupied, You therefore need to check how long your policy covers you for and liaise with the insurance company to tell them when the property becomes empty, so that there are no unpleasant surprises when they refuse to pay a claim.
You have invested in a property so you should also consider investing properly in a landlord insurance policy that covers all bases.
Scott Baker is a property investment consultant. He particularly likes helping young people with property investment choices. He has been blogging about his property endeavours for over 5 years now.