Landlord insurance – why might you need it and just what does it cover?
Why you need it
Unless you are prepared to pay for any and every kind of damage to your buy to let property – including its total loss in a major disaster – you need the protection of landlord property insurance to indemnify you against such losses. The risks are many and include such potentially serious incidents as fire, explosions, impacts (from vehicles, aircraft or falling trees and branches), flooding, vandalism and theft.
Indeed, if you are buying the let property with the aid of a mortgage, your lender is certain to insist that it is insured – to at least the amount outstanding on the mortgage loan.
As the landlord, you also owe a duty of care towards your tenants and their visitors. If one of them – or indeed a neighbour or a member of the public – is injured or has their property damaged, they may hold you negligent in your duty of care and sue you for damages. These may be considerable and the many thousands of pounds which might be claimed you are unlikely to be able to find from your own pocket.
Your buy to let property is the major asset of a business, upon which you rely for the receipt of rental income. If rental income is disrupted because the building becomes temporarily unusable following a major accident, how are you going to meet your mortgage repayments, pay letting agency fees or maintain the many other ongoing expenses your business is likely to demand?
What does landlord property insurance cover?
The answer is suggested quite clearly by the reasons for your needing such insurance. In other words, core elements of the typical policy make provision for:
- loss or damage to the structure and fabric of the building itself – with a total sum insured that is sufficient to cover the potential need for its complete reconstruction following a major incident;
- similar protection for any contents you own in the let property – tenants, of course, are responsible for insuring their own belongings;
- indemnity against landlord liability (including public liability) claims – let property insurance policies typically provide a minimum of £1 million of cover; and
- compensation for the loss of rental income following an insured event which leaves the property temporarily unlettable – usually up to a maximum level of compensation and often linked to a given percentage of the total sum insured under your policy.
Additional elements of cover
It is important to remember, however, that not all landlord insurance policies are the same. Some may include cover against certain risks as standard, whilst others may provide them as an optional extra.
Does your policy extend to tenants who might be considered to be “high risk” – a category suggested by the Association of Residential Letting Agents (ARLA) that includes students, benefits claimants, or multiple single sharers? Some policies provide cover whatever your choice of tenant, whilst others may charge a premium for the inclusion of those considered to be high risk.
On a similar them, some policies include cover against the risk of malicious damage by tenants as standard – others may include the cover only as an optional extra.
Optional legal expenses insurance might prove useful in helping your defence against different kinds of legal action, including allegations of negligence on your part as the landlord or property owner.
To find out how we can help you get the most appropriate cover for your let property, please feel free to contact us for no-obligation help and advice.