According to the most recent census of England and Wales, more than 1 in three homes is let by landlords to tenants.
In other words, there are more than 8 million landlords. There are also many types of landlord – from the small to multi-property, from what might be called the “professional” landlord to the “accidental” landlord.
The so-called professional making the conscious decision to make a livelihood from buying to let, and the “accidental” landlord who finds him or herself becoming a landlord almost by chance, after inheriting a property or otherwise deciding to let out a home they previously occupied themselves.
Whatever landlord profile you might fit, however, you are likely to share at least one thing in common with every other one – the need for landlord insurance cover.
Whilst there is no single profile representing the average landlord, it might be helpful to look at some of the most common profile features to gain a better understanding about why landlord insurance may be needed and just what it needs to cover.
In research that supports our own customer surveys here at Cover4LetProperty in 2013, in the same year the Strategic Society Centre published data suggesting that landlords tend to be:
- middle aged (with three out of four between the ages of 45 and 64);
- married (72%);
- well educated (40% having a first degree or higher);
- approximately one third of private rental sector landlords own property in London or the Southeast of England;
- the majority (72%) of landlords have just one property to let, although a sizeable minority of just over 10% have three or more properties; and
- more than 75% of landlords also have other jobs, employed principally in the private sector.
Not only do these statistics support the view that landlords may be a disparate and varied group of property owners, but they also suggest that, as a group, they are likely to give priority to protecting the property in which they have invested. And the best way to do that is by way of landlord insurance.
So what does it cover?
Put most simply, landlord insurance protects your buy to let business. It protects the principal business asset – the property and its contents – and many of the additional risks and liabilities that go with being a landlord.
The role of insurance in protecting your business is critical and distinguishes landlord insurance, for instance, from the standard forms of home building and contents insurance typically arranged by home owner occupiers.
The risks and perils are different when your property is let to tenants and, so, specialist landlord insurance is required, rather than any standard form of home insurance.
With this important principle in mind, it is possible to take a closer look at how landlord insurance protects you:
Building and contents insurance
- at the heart of any such cover is likely to be the protection of the physical structure and fabric of the building and its contents;
- this is protection against potentially very serious risks such as fire, subsidence, flooding, storm damage, escape of water, smoke damage, impacts, theft and vandalism;
- it is important to note, though, that policies vary widely and some risks may not be covered – or may be subject to special conditions – depending on the insurer;
- typical examples are subsidence, especially if there has been past evidence of the problem, and flooding, if your property is in an area known to be vulnerable to such a risk;
- cover is also available for those contents you own, but landlords sometimes keep little of any great value in their let property, so a minimum level of cover may be all that is necessary;
Landlord liability insurance
- an especially important element of cover is designed to indemnify you against claims from your tenants, their visitors, or indeed members of the public, who may suffer a personal injury or have their property damaged as a result of what they claim to be your negligence as the landlord or property owner;
- such claims arise from the duty of care which you owe towards such individuals, if you fail to take reasonable precautions to prevent their injury or loss, you may be faced with substantial claims for compensation by way of damages;
- the potential size of such claims is such that landlord liability insurance typically provides a minimum of £1 million cover;
Loss of rental income
- you are running your buy to let property as a business, which relies upon the generation of income from rents;
- in the event of a major insured risk, however, your let property may be so severely damaged that it is temporarily unfit for occupation and you stand to lose your normal rental income as a result;
- landlord insurance may provide a degree of financial compensation – or the provision of alternative accommodation – in such an event;
Employers’ liability insurance
- if you employ others to help run your buy to let business, the law requires – in all but a few exceptions – that you hold a minimum of £5 million employers’ liability cover in the event of an individual sustaining an injury or contracting an illness or other medical condition as a result of working for you;
- on occasion, this cover may be available as an optional extra to your landlord insurance or you may purchase it separately on a standalone basis.
Although these core elements may be reasonably common whatever type of landlord you happen to be, it may be clear that there is scope for considerable variation in the precise scope and level of cover you purchase.
To help you negotiate this potential minefield and ensure that you secure the cover you need – at competitively priced premiums – you might want to consult a specialist broker in the provision of landlord insurance.