Anyone who rents out a property should take out insurance cover in case something goes wrong. It sounds pessimistic, but it’s actually just common – and financial – sense.
What if there was a flood or fire at the property? Could you afford to repair the damage and find alternative accommodation for your tenant out of your ready resources? It’s never a problem before it’s a problem as they say!
Most importantly make sure you have specialist landlords insurance. If you let a property taking out standard insurance in your own name, there’s every chance the insurance company will refuse to pay any claim and you will be out of pocket.
Although Butler Sherborn do not provide insurance cover for landlords we can offer you access to a range of companies who provide specialist insurance, and of course, if you are a Managed landlord, we would deal with any insurance claims on your behalf. Read our latest case study.
We recommend that you shop around, there are lots of online comparison sites, however, please do bear in mind that the cheapest quotes are not always the best!
A decent policy will insure the building, your liability and loss of rent. You can also typically add contents cover, home emergency, legal expenses and sometimes rent guarantee insurance.
We have created a very quick guide to help you understand the different types of insurance you might need to help you:
Although not a legal requirement your bank or building society might insist on appropriate buildings insurance as a condition of the mortgage. Buildings insurance in case the structure of the building, plus any fixtures and fittings, were damaged by a range of risks including fire, flood and storm. Check your Sum insured, this should reflect the rebuild cost of the home, not its market value. An insurance company should be able to make an estimate for you based on the age and type of the property. (Some policies offer unlimited cover giving you further peace of mind)
Landlords should consider contents cover even if they let the accommodation unfurnished. You might, for example, provide curtains, light fittings and kitchen appliances in an unfurnished property, so a small amount of cover would offer peace of mind. The tenant is responsible for insuring their own possessions.
Contents insurance is a must if you let a furnished property. (think about insuring your belongings in a new-for-old basis and think about adding accidental damage cover.
For example, this would be in the instance that your property was uninhabitable after damage from, say, a fire or flood. (always check the limit on any payout to see it matches your requirements, especially if you rely on the rent to pay a large mortgage)
Some policies also cover the cost of alternative accommodation for your tenants if they have to move out of the property, though again there is often a limit to the maximum claim.
How would you cope if the boiler broke down or a pipe burst and flooded the rental property? Home emergency cover gives you access to a 24-hour helpline so you can arrange for emergency repairs to be carried out by suitably qualified tradesmen.
If you do not employ a managing agent, home emergency cover can be invaluable. You should, however, read the details carefully and be clear that home emergency insurance is not a substitute for property maintenance.
Tenants these days are increasingly knowledgeable, so you should be aware of your legal liabilities.
If, for example, a tenant was injured by faulty wiring or tripped over a broken floor tile, they could sue for damages. You could also be in trouble if you damaged another person’s property or an employee was involved in an accident while working at the rented accommodation.
Damage claims can be costly, but most landlord insurance policies offer liability cover.
Tenants don’t always pay their rent. You have a right to evict a tenant for non payment of rent, but you have to follow the correct legal procedure, which can be both lengthy and costly. Meanwhile, you are losing money.
Rent guarantee insurance will cover the rent up to a certain amount over an agreed period – and it can offer a financial lifeline to landlords. It also usually includes legal expenses insurance, so you don’t have to worry about the legal costs if you are involved in a dispute of any kind with your tenant.
Tenant’s circumstances do change, and of course are more likely to do so in times of economic uncertainty.