If you have recently taken on the role of a landlord, you have probably already given some though to the best ways of safeguarding what is likely to have been a significant financial investment in the property itself, not to mention the time, effort and high hopes for the business of letting the accommodation.
Also, if you have a mortgage on the property, it may typically be a condition of your contract that it is protected with adequate insurance, to protect both your financial interests in the property.
What all of this points to, of course is landlord insurance – or buy to let insurance as it is also known – and the following is a brief guide to what it covers and why.
What is landlord insurance?
It is specifically designed as a form of cover for anyone who lets their property to tenants – so is available for all types of let premises, whether residential or commercial. The special and specific nature of landlord insurance is considered in detail on the website Landlord Zone.
With respect to residential let property, it is important to distinguish landlord insurance from the kind of standard home insurance cover typically arranged by an owner occupier to protect their home or by a tenant to safeguard their belongings.
Landlord insurance puts a buy to let business at its heart, rather than the home occupied by an owner occupier or a tenant. It is a vitally important distinction because if your property is let and you rely only on standard home insurance, you are likely to find that the insurer rejects any claim when the premises are occupied by tenants.
What does it cover?
Landlord insurance is a form of business insurance that has property insurance at its heart.
The precise scope of any particular policy is likely to vary from one insurer to another, of course, but typically covers at least the following elements:
The building and the landlord’s contents
- this is hardly surprising, of course, since the investment property is likely to represent a considerable value, with the owner wanting to protect both the structure and fabric of the building itself, and of the contents, against such potentially major threats as fire, flooding, storm damage, escape of water, impacts, vandalism and theft;
- some buy to let insurance policies may provide protection against the risk of malicious damage to the property or its contents caused by tenants;
- tenants themselves, of course, are responsible for arranging any insurance they see fit for their own possessions and belongings;
- whilst protection of the physical assets of the business is important, a potentially bigger risk might be posed by claims from tenants, their visitors or members of the public who suffer an injury or have their property damaged as a result of any negligence on the part of the property owning landlord;
- this stems from the established principle in English common law, typically known as a duty of care – and it is a duty to which landlords in particular might want to pay attention;
- claims arising from any alleged breach of the duty of care on the part of a landlord may reach very substantial proportions and, to guard against these, the landlord liability indemnity included in your insurance is likely to be for at least £1 million – and not uncommonly double that figure or even more;
Loss of rental income
- perhaps one of the clearest illustrations of landlord’s insurance being designed to protect the business that is buying to let is the provision for compensation in the event of your losing that all-important income stream;
- your property insurance guards against a number of major risks. In the event of one or more of them occurring, however, the premises you let might be temporarily unfit for accommodation. In that case, landlord insurance typically offers a measure of compensation for loss of rental income – generally up to a total fixed amount or percentage of the total insured sum;
- when you are trying to make a profit from letting your property, there is likely to be little available for funding the legal costs involved in defending claims against you or for evicting those tenants who may have broken the terms of their tenancy agreement;
- legal expenses cover, therefore, may be included to cover all or some of the costs involved in such actions.
As may be clear, landlord insurance is likely to play a crucial role in protecting and safeguarding any property you may have bought to let. It is equally critical to remember that this is the kind of insurance designed specifically with the landlord in mind and that it is quite inappropriate to rely upon any standard form of building and contents insurance intended for owner occupiers of their homes.