Owner occupiers and landlords of buy to let property might typically own homes that are to all intents and purposes quite indistinguishable, but for the fact that the one is the owner’s place of residence whilst the other is occupied by rent-paying tenants.
On the outside, therefore, there may be no great apparent difference, but on the inside there is. The same might be said of standard home owner’s insurance and landlord insurance – on the outside they appear fairly similar, but it is on the inside that the real differences begin to emerge.
For a more detailed explanation of just what these differences amount to, you might want to consult a specialist insurance broker – such as those of us here at Cover4LetProperty – for expert advice about the principal elements of cover typically provided:
- probably the greatest area of similarity lies in the protection given to the actual structure and fabric of the property against such major perils as fire, flooding, storm damage, impacts and vandalism;
- in the case both of insurance for owner occupiers and for landlords, the total sum insured for the building or buildings needs to reflect the potential cost of complete reconstruction in the event of a major disaster;
- although the cover may appear similar, however, you still need to inform any mortgage lender with an interest in your property that it is being let to tenants and not occupied by you as your residence;
- if there is a permanent or long-term switch to the property’s use as let premises, you may need to change your mortgage, suggests the government sponsored Money Advice Service
- both standard home insurance and insurance for landlords offer the option of extending cover to the property owners’ possessions;
- in the case of landlord insurance, some policies also include the risk of loss or damage to the property or to its contents as the result of malicious actions on the part of the tenants;
Property owners liability
- although the owner occupier’s insurance might also include indemnity for liabilities as a property owner, in the case of the landlord this might be even more important a safeguard;
- the landlord has a particular duty of care not only to members of the public, but more specifically to his tenants and their visitors;
- if any individual suffers a personal injury or had their property lost or damaged as a result of the landlord’s negligence of his duty of care, the claim for compensation may assume substantial proportions;
- indemnity for landlord’s liability, therefore, typically starts at a minimum level of cover of £1 million – and double this figure is by no means uncommon;
Loss of rental income
- there may be one area in particular where the business function of let property is especially relevant – the generation of rental income;
- so that this source of business income continues to be protected even when the property may be impossible to let for a while – following one of the principal insured events that renders it uninhabitable, for instance – landlord insurance may offer compensation for loss of rental income;
- such compensation is typically limited to a maximum amount equivalent to a percentage of the total building sum insured or to some other figure.
It is important to recognise, therefore, that there are a number of important differences between the standard home policy that might be arranged by the owner occupier and the business insurance that is likely to be required by the owner of let property.
If you let your property to tenants, it is important that you arrange suitable landlord insurance, since insufficient or inappropriate standard home insurance cover is unlikely to provide safeguards against those risks you run as a landlord.