There is a general consensus that changes to tax rules and ever-increasing regulation have made life more difficult for landlords of let property in the past couple of years.
Those difficulties have been made no easier by the growing trend towards a contraction in the private rented sector through greater home ownership – a trend on which we reported in an article in May 2016.
As the business case for running a buy to let business has come under increasing pressure, it is more important than ever that those business assets are adequately safeguarded. And the principal means of defence lies in adequate property insurance.
So that the cover you buy provides the cover you need, however, it is important that it is tailored to suit the particular job for which it is intended. Not just any type of property insurance is called for, in other words, but insurance specifically designed for let property – namely, landlord’s insurance.
But making the relevant choice does not stop just there. Even when you have recognised your need for landlord’s insurance – as opposed to standard owner occupier’s home insurance, let’s say – there are still further levels and types of landlord insurance to be unpicked:
Residential landlord’s insurance
- quite naturally, insurers have a general concern to know just what types of risk are being covered – and many of these are going to be determined by the use to which the insured property is put;
- there is a distinction between let property which is to be occupied by tenants as their home and tenants which are occupying it in the course of their business or for commercial purposes;
- residential landlord’s insurance, therefore, is specifically designed to provide the protection you need when your let property is to be occupied by tenants on a residential basis;
Commercial property insurance
- the other side of this particular coin is when you are letting your property for commercial or business use by tenants.
- when your tenants are using the premises for these purposes, the risks are of a different order and scale to those when the property is being used as a residence. And those differences need to be reflected in the type of insurance you are arrange;
Unoccupied property insurance
- whether you own commercial or residential let property, let is a further set of circumstances where you are likely to need yet a different type of property insurance – that is when the premises are left empty and unoccupied for longer than a month or so;
- this might happen for a number of reasons – you are in the process of selling the property, refurbishing it, or still looking for tenants to replace who have just left. Whatever the reasons, however, this is a time when the premises may be at their most vulnerable;
- not only does an unoccupied property attract all the wrong kind of attention – from undesirables such as squatters, vandals, thieves and arsonists – but relatively minor repair and maintenance issues might go unnoticed if there is no one there to spot them;
- property managers, VPS, have detailed some of the ways in which empty commercial and residential let properties are exposed to heightened risks;
- it is because of these extra risks that insurers typically restrict or remove the cover normally in place once the property has been empty for a month or so – and specialist unoccupied property insurance is needed in its place.
So, there are different types of landlord’s insurance designed to protect premises according to their use at any one time – residential, commercial or unoccupied.
These distinctions apply whether you own the property as part of a purpose-designed buy to let business or whether you are what is sometimes described as an “accidental landlord” (you find yourself having become a landlord almost by chance, having inherited a property or one that you do not need for your immediate personal use).
Types of insurance
In addition to there being different types of landlord, there are also different types of insurance typically employed to safeguard the premises:
- at the core of practically any type of property insurance – including that which is being let or leased to tenants – is the protection of the structure and fabric of the building itself against such potentially devastating risks as fire, flooding, impacts, storm damage, escape of water or fuel, vandalism and theft;
- this is the purpose of building insurance and the total sum insured is typically sufficient to cover the worst case scenario in which the premises are completely destroyed as a result of some insured incident and need to be totally resconstructed;
- whether your let property is being used for residential or commercial purposes, or is temporarily lying vacant and unoccupied, you are likely to continue to own at least some of its contents;
- those contents which you own need to be covered by contents insurance – although the provision of cover for contents owned by your tenants remains their own responsibility;
Public liability insurance
- as the owner of the let or unoccupied property, you also have a general duty of care to prevent the risk of injury or damage to the property of any tenant, visitor, member of the public (or even any unauthorised intruder;
- if one of these individuals suffers an injury or has their property damaged, you may be held liable and ordered to pay a substantial amount by way of compensation;
- landlord’s public liability insurance is designed to indemnify you against such claims.
Insurance for landlords of let property, therefore, operates on a number of different levels – according to the use to which the premises are currently being occupied, and depending on the types of risk which need to be covered. If you own let property, therefore, it is important to arrange the cover which serves your particular needs and circumstances at the time.