Building and contents insurance: A guide for landlords

Building and contents insurance: A guide for landlords

With so many obligations and so much legislation to comply with, landlords could be forgiven for forgetting one or two minor things when letting out a property.

But one key thing you must remember is taking out landlord insurance. Failing to do so could mean huge costs if something goes wrong.

Of course, the best way to ensure all your legal obligations are met is by using a lettings agent's full management service, leaving you free to focus on things like building and contents insurance.


Letting out a property: Costs

As well as adequate landlord insurance, there are a host of other costs associated with letting out a property.

Landlords need to consider:

  *  Maintenance costs

  *  Mortgage payments

  *  Letting management fees

  *  Stamp duty

  *  Solicitor fees


Types of landlord insurance

While landlord insurance is not a legal requirement, unless you own your buy-to-let property outright it's likely your mortgage lender will insist on a buildings insurance policy.

For leasehold properties, such as flats and apartments, the terms of the lease will almost certainly include clauses on insurance, too.


Buildings insurance

Buildings insurance for landlords covers costs for repair or rebuild in the event of a fire, flood or vandalism.


Landlord contents insurance

Landlords' contents insurance is worth taking out if you are planning to furnish your buy-to-let property and want cover for items like sofas, appliances and other furnishings.

If your belongings are damaged by fire or water, landlords content insurance should pay for repair or replacement.


Property owners liability insurance

Landlords should also consider property owners' liability insurance. This adds a level of protection should your tenant or a visitor to your property, or something they own, be damaged by your property.

So, if your tenant trips on a piece of laminate flooring that is sticking up and suffers a serious injury, property owners' liability insurance should cover legal fees and any compensation claim made by the tenant.


Accidental damage insurance

We already mentioned contents insurance for landlords, but that policy is unlikely to cover accidental damage. For that, you should look at accidental damage insurance, which protects against things like spillages on your carpets, or damage to walls through moving large furniture.

 

Legal expense insurance

One of the things landlords dread the most when renting out properties is unpaid rent and eviction procedures.

That's where legal expense insurance comes in. There are a multitude of costs associated with a tenant who falls into rental arrears - the unpaid rent itself, plus numerous costs to evict the tenant.

Legal expense insurance covers the costs incurred by landlords when chasing unpaid rent or going through an eviction process.


Tenant default cover

Finally, tenant default cover covers your rental income should your tenants default on their rent for a sustained period of time, sometimes up to eight months.

 

Levels of cover

Buildings and contents insurance cover is usually set against the cost of rebuild or replacement values of items.

The other kinds of landlord insurance mentioned above generally have maximum cover levels.

Estimating the cost of a full rebuild in the event of a fire, for instance, should include the costs of labour and materials and not just the property's sale value.

Landlords should call in the assistance of a surveyor when calculating things like rebuild costs, to ensure their buildings insurance policy provides adequate cover.

For contents cover, you should ensure all your contents are included in your estimated value to replace or repair - so that would include appliances such as a fridge, freezer, oven and hob as well as furniture like sofas and sideboards.


How much does landlord insurance cost?

Costs associated with landlord insurance will always vary from landlord to landlord and are dependent on a number of factors, such as:

  *  The type and levels of cover you require

  *  Your property's location

  *  Your property's age

  *  The kind of tenant living there

  *  Your property's security measures


Insurers will always work out the chances of you making a claim when calculating your premium, so making sure your property is secure and your tenants have a solid, reliable rental history can help to bring premium costs down.


How to Rent Guide

This government guide must be given to tenants as part of section 21 regulations that came into force under the Deregulation Act 2015.

It's also useful for landlords as the guide details requirements on insurance when renting out a property, stating:

"Landlords should insure the building to cover the costs of any damage from flood or fire"

 

Tips for taking out landlord insurance

  *  Accidental landlords

If you're what's known as an 'accidental landlord' in that you're renting out the property you have previously lived in, you could be forgiven for thinking your current insurance policies will remain valid.

That is not the case. You will either need to upgrade your policy or get a new one to cover your home as a rental property.


  *  Leasehold flats

If your buy-to-let property is a leasehold flat, you will need to notify the freeholder than tenants are moving in, otherwise the freeholder's buildings insurance could be void.


  *  Insurance checks

There may be occasions when your insurance provider wishes to check the property during a tenancy, so make sure everything is in order and nothing left to chance that could invalidate your cover.


  *  Get insured at the right time

If you're buying a property to rent out, you'll know the sale is legally binding from the point of exchange. Therefore, you should insure your property from that point - not from completion or when your tenants move in.