When you acquire a buy to let property, your main focus may be on the fact that is in an asset that may contribute to a comfortable retirement for you. Or, perhaps it is nest egg that you hope may help to fund your children through university or get them onto the property ladder?
While it is exciting making plans and potentially watching your investment work hard for you, it is important not to forget the less ‘glamorous’ side of being a landlord and arranging things such as your buildings insurance for landlords. It may be a very important part of protecting your precious asset.
Rather than seeing let property cover as just another bill to pay, you may wish to bear in mind that having landlords insurance may be necessary to:
- abide by the terms of your mortgage;
- and protect your own pocket.
Your mortgage agreement may require you to have landlord buildings insurance
If you have a loan secured on the buy to let property, it may be a condition of that mortgage that you arrange suitable buildings insurance for landlords. This protects both your and their financial interests in the property.
For example, if the property is uninsured and goes up in smoke, the lender would be left with virtually nothing to provide security for the loan. And you would be left making monthly mortgage payments for a property that no longer existed.
Landlord’s building insurance is designed to step in and pay the costs (up to the agreed sum insured) to rebuild your property.
When you took out the mortgage, the valuation you had done may have specified a sum insured required for the purposes of buildings insurance. Note that this amount may typically include the costs of clearing the land, should the property be completely razed to the ground.
What does the landlord cover give you?
Of course, once you have received a landlords building insurance quote, there is more to consider than price alone. You may wish to weigh up what you would actually be getting for your money. Does the price include any element of contents cover or legal cover? The degrees of these covers included may vary between providers, so these are issues that may be worth checking in some detail.
Likewise, you may also wish to compare lists of the risks that your buy to let building insurance may cover. Whilst the exercise may seem to be tempting fate, at least you would know where you stood if there was an earthquake that affected your buy to let UK property!
Typically every sensible landlord wants the protection of insurance and equally typically, every one will be looking for what they consider is cheap landlord building insurance.
What cover do I need?
Your needs for landlords’ insurance will depend upon your individual circumstances, however, a good landlord insurance policy may provide you with financial protection against:
- damage to the structure of your building;
- damage or destruction of your fixtures and fittings;
- ditto for the contents plus their theft;
- third party public liability claims;
- loss of rental income (where this arises from an insured risk);
- some forms of legal fees (again, if they relate to an insured risk).
Typically, a policy won’t always cover things such as tenants that depart suddenly leaving large rent arrears or tenants that you’re trying to evict. So if you incur legal expenses in either situation and/or an associated loss of rental income, your policy typically won’t cover it.
By contrast, legal fees incurred in defending a third party liability claim may be covered.
What is loss of rental income cover?
If the worst happens – the property burns down or is destroyed in another manner – then the tenant will have to leave because the property is inhabitable. This means they will also stop paying rent.
Unfortunately, your mortgage would continue to fall due, so buildings insurance for landlords which includes loss of rental income cover – which can help replace loss of rent due to an insured risk – will help you keep up with your mortgage repayments until such time your property was repaired / rebuilt and your tenant returned.
How much does buy to let insurance cost?
There are a number of things that may affect the price of your buy to let building insurance. For example, an insurer may take into account:
- the location of the property. This is relevant from the point of view of the potential risks it may face from crime and/or flooding. Given that these are issues that you are likely to have borne in mind yourself when purchasing the property, your insurer’s attitude may not come as a surprise;
- the value of the property. In this sense, the way in which prices for buy to let building insurance may be worked out may be similar to that for your owner occupied property;
- the type of tenants that you have. For example, in some cases, landlord’s insurance may be less expensive for homes for professional tenants than for students because the former may be perceived to take more care of the building; and
- the history of any claims that may have been made on the property. If claims have been made previously for structural issues, you may find that an insurer may want full details before being able to give you a price.
Can I get cheap buy to let insurance?
While there’s nothing necessarily wrong with that as an inclination, do remember that cheap landlord building insurance might not necessarily mean the same thing to everyone.
Some people may just say that it’s the insurance that they can get away with paying the least for. That might be fine though it may also not seem the wisest choice of definition to run with in the event of a claim if the circumstances weren’t covered.
So, in essence, what may be a cheap landlord insurance policy for you may not be the cheapest for someone else. It depends on the level of cover you need and your perceptions as to what is cheap and what isn’t.
Perhaps a more balanced definition would be a policy that met all of your needs for a cost-effective price. Using that as a guideline for buy to rent insurance may help avoid ending up with something that’s unsuitable.
Finding the most suitable cover
Knowing that you have suitable cover behind you may help you rest a little more easily at night. That’s why finding appropriate buy to let insurance is more important than thinking exclusively about cheap landlord building insurance.
Finally, don’t forget that we are only a telephone call or email away. So, if you need a landlord’s insurance quote or simply some help and guidance on choosing buy to let buildings insurance, then we will be very happy to help.