Landlord insurance – also known as let property insurance or buy to let insurance -– is generally not a legal requirement (unless you have a mortgage on the property, but we will get to that later). But if you do not have it, the considerable investment represented by your let property may be at dire risk and in peril.
It is in peril because of the risks to which any let property is exposed and against which let property insurance is designed to offer effective cover and protection.
By whatever name, therefore, landlord insurance aims to protect the structure and fabric of the let premises, its contents, the third-party liability risks arising from your having tenants – and, from time to time, their guests – on the property.
Deciding that landlord insurance, or any component of it, is anything other than essential might be unwise.
Landlord insurance and your buy to mortgage
If you have an outstanding balance on the buy to let mortgage you arranged to purchase your let property, the lender is almost certain to have asked you to sign a legally binding document confirming that you have and will maintain, appropriate let property insurance at all times.
At the time your mortgage was taken out, they may also have requested a copy of your landlord insurance policy.
That’s because they will be keen to ensure that their loan capital is well protected if something unfortunate happens to your property.
If it is logical for a mortgage lender to seek to protect their investment in this fashion, then the same reasoning may dictate that it would be highly advisable for you to do likewise.
Owner-occupiers standard home insurance vs. landlords insurance
If you live in a property you own and nobody apart from you and your family usually are resident there, you will be considered to be an “owner-occupier” by insurance providers.
Typically, non-paying guests staying over or using your property for a short period are not a problem. Your insurance will not be at risk, providing that there are no commercial arrangements in place in such circumstances.
However, the moment you start charging somebody for accommodation in a property you own, whether or not you live in it yourself, you have made a commercial arrangement. By law, you have become a landlord, and you will also find that you have certain legal responsibilities and obligations.
The risks involved in offering insurance for a property vary depending upon whether or not it is owner-occupied or let out for rental income. That means that typically there are two very separate and distinct forms of property insurance:
- owner-occupier; and
- let property insurance.
With tenants occupying the dwelling, the risks are of a different order and magnitude, so that specialist let property insurance is essential – indeed, if you rely on your standard home insurance when the property is let, you are likely to find any claim rejected.
If you previously lived in the property as an owner-occupier and had standard home buildings and contents insurance in place, this cover will become invalid the moment you start renting your property out. That may even apply if you only rent out part of it, such as a couple of bedrooms.
In such circumstances, you will typically need to switch to landlords’ insurance to ensure continuity of cover.
Note that you may also be in contravention of the terms of any existing owner-occupier mortgage you have on your property, and it may be advisable check the implications of change with your mortgage lenders in advance.
That is why you need specialist landlord let property insurance.
Who needs let property insurance?
Let property insurance is required, therefore, if the home you own is let to tenants. But this, too, may embrace a wide range of possibilities. So, let’s take a closer look at who needs let property insurance. That is the specialist cover you are likely to require:
- even if you are only letting out a single room in the house you, too, continue to occupy (under the government’s Rent a Room scheme, for example);
- if you are letting friends live in your property or part of it, in return for them paying you a rent;
- if you are letting your property out only occasionally, for example, for holiday rental purposes during the summer months;
- in situations where your lettings are infrequent and sporadic, usually being done on a short-term basis to raise some extra cash when needed;
- whether your property is furnished or unfurnished; and
- whether or not you have a formal written tenancy agreement in place.
The basic condition to keep in mind is that if you are using your property for the generation of any sort of rental income, then you need let property insurance.
As a general note, if you intend to change the use of your property – for example, you decide to let it out for a few weeks during the summer – you must inform your mortgage provider. Failure to do so could see you in breach of your mortgage agreement.
What does let property insurance cover?
Any consideration of the importance of let property insurance, of course, needs to examine just what the typical policy covers. Although there are many and varied products available, let property insurance typically focuses on providing indemnity against the following risks:
- at the heart of let property insurance – just as with your home insurance – is the protection of the structure and fabric of the building itself against such potentially severe risks as fire, flooding, storm damage, impacts, vandalism, and theft;
- arrange your insurance through us here at Cover4LetProperty and the building insurance also typically protects you against the risk of subsidence, malicious damage by tenant and, offers trace and access cover as standard – something you are unlikely to find with some other let property insurance providers;
- although your property is let – and your tenants are responsible for insuring their own possessions and belongings – let property insurance may also protect those contents you own;
- if a tenant causes malicious damage to your property or its contents, our policies also include as standard cover against such acts (up to set limits);
Landlord liability insurance
- the moment you let your property to tenants, you also assume responsibility for ensuring their health and safety in the dwelling;
- if one of your tenants, a visitor of theirs, some other caller at the property, a neighbour or a member of the public suffers an injury or has their property damaged through some contact with the premises you own, you may be sued for a substantial sum in damages – especially if someone has been physically injured;
- levels of landlords’ public liability protection may vary considerably, with some policies being more generous in this area than others – which might be significant given the potential size of some court awards for damages;
- while let property insurance typically incorporates at least £2 million indemnity against such claims, in the case of policies arranged by us here at Cover4LetProperty, there is the option to go up to £5 million;
Loss of rental income
- whether you are a full or part-time landlord, the rent you receive from your tenants is a valuable source of income;
- that income stream is likely to be disrupted, however, following a significant insured event which leaves your property temporarily uninhabitable pending repairs and reinstatement of any damage;
- let property insurance (as an optional add-on to your policy) may, therefore, provide for compensation for such loss of rental income – up to prescribed limits, of course, typically related to a percentage of your total sum insured.
Unoccupied let property insurance
If your property becomes unoccupied (by which insurers may typically mean that the property remains empty for 30 to 45 consecutive days or more but depends on individual providers), then insurers typically require you to notify them of this fact.
Failure to notify the insurer of a property becoming unoccupied in that period may result in an insurer refusing to pay a claim in the event of a fire, storm or other peril that may otherwise have been covered.
Circumstances in which such vacancies may arise include:
- problems finding new tenants or delays in them moving in;
- building or refurbishment work overrunning;
- legal proceedings like divorce or probate; etc.
At times like this, when your property is going to be empty, specialist vacant property insurance policies are available (not just for landlords, but for anyone whose property stands empty for 30-45 consecutive days or more. These might be people who are having an extended holiday or working away from home for some time, for example).
Carrying out a let property insurance review
In the light of the discussion so far, or because any existing landlord insurance policy is soon up for renewal, then carrying out a let property insurance review may be something that might be of benefit to you.
You might be inclined simply to renew your existing cover. But if you do this, you may be missing out on some opportunities to provide yourself with more extensive protection and perhaps save some money into the bargain.
You may find, for example, that some features of cover that you may consider to be an essential part of any landlords insurance policy, may be provided as standard by some policies but are an optional extra – for which you must pay more – on others.
Your let property insurance review allows you to identify those policies which most closely correspond with the features of cover that you may feel that you need for your peace of mind as a landlord.
So, you may find that some policies may offer as standard:
- subsidence cover;
- malicious damage by tenants;
- cover for students and DSS;
- differing upper level limits;
- trace and access cover.
Getting the cover you feel comfortable with may only be part of the battle. As we have seen, you may also need to consider what, if anything, you need to do if your property is empty for an extended period.
Comparing let property insurance policies
As part of your review of existing arrangements, you may decide to compare the competing products available – whether you are an existing landlord, new to the role or even an “accidental” landlord.
If you are able both to compare landlord insurance and arrange a suitable policy online at the same time, so much the better.
And that is precisely what we can offer you here at Cover4LetProperty. We can show you some buy to let insurance quotes that are specifically tailored to your requirements. From these, you can choose and purchase online the one which you feel most closely matches your expectations. Or, you can give us a call if you’d prefer to discuss your quote with one of our specialist team.
Of course, not all landlords require exactly the same levels of cover. If you are letting your property out on an unfurnished basis, for example, you may not need landlord contents cover.
Even for those aspects of landlords’ insurance that all landlords may require like buildings cover and third party liability, there may be significant differences in the levels of cover on offer from different providers. So, taking some time to read through what’s on offer from let property insurance online may be necessary.
With our help, you may arrange and compare let property insurance online.
Understanding what is available in the insurance marketplace to help you protect the investment you have made in your property, may be important to the success of your letting business. A short time spent looking at options may then allow you to take finding let property insurance online, off your list of things to do.
As with all financial products, there may be some paperwork to review. Issues you may wish to pay close attention to include the amount of any excess in the event of a claim (the first part of any successful claim for which you are personally responsible), the exclusions or limitations incorporated within any policy, and what your obligations are under the buildings and contents insurance for landlords to keep the cover valid (for example, your duty to notify the insurer if the property should become vacant, to keep it in a good state of repair, to meet certain property security requirements, and so on).
We are always on hand to answer any questions or queries you have, so please feel free to contact us – we’d be delighted to help.