Being a landlord brings with it a whole host of challenges. Not only do you need to pay the mortgage each month, you have to protect both your property and your tenants. It’s a common misconception that a standard buildings and contents insurance policy will cover all three once it’s let – but unfortunately this is not the case.
In practice, landlord insurance is very similar to a standard household insurance policy – the buildings are covered and you can still get contents insurance to cover furnishings as well as accidental damage. However there are a few main differences…
The main difference is that, because you are physically not living in the property, it is not classed as ‘owner-occupied’. Standard insurance policies are not designed to cater for the process of earning an income through letting a property, nor is it designed to cover your legal obligations to protect your tenants whilst they are living there.
Public Liability Insurance
All landlord insurance policies include what is known as a ‘Public Liability Insurance’. This is designed to protect landlords for injury or damage to others, including tenants, as residents in the property. It will cover your legal costs in defending a claim and the legal costs of the claimants if you are judged to have been at fault. It will also cover damages awarded to the claimant as well as loss of earnings – without it you could be in for an expensive time!
Loss of Rent
Another standard cover found within landlord’s insurance policies is ‘Loss of Rent’. This is very important as it covers landlords against expenses they could incur should their property become uninhabitable. You could have to find and fund alternative accommodation for your tenants, as well as make up the loss of rent during the period the property is out of use – Loss of Rent covers all of these circumstances.
If you are worried about your tenants not paying you your rent each month ‘Rent Guarantee Insurance’ can often be added to most policies. It isn’t normally standard on landlords insurance but may be available as a bolt-on or as a separate insurance policy itself.
What about contents insurance?
What insurers consider contents in landlord insurance is usually slightly different than for a standard household policy. Most policies will only cover accidental damage to the contents that the Landlord has provided for the use of the tenants. This can include, but is not limited to, carpets, white goods and communal contents in hallways.
It is also worth remembering that it will only cover items and furnishings owned by the landlord and not any contents owned by the tenants – they will have to arrange their own contents insurance separately.
How much you pay for landlord insurance will all depend on the type of property, its age, location and the buildings sum insured. It will also take into account your history of claims and how many tenants will be in the property.
But in order to benefit from all the cover of your particular landlords insurance policy then you will have to have a number of measures in place. This may include a boiler that’s checked annually by a registered Corgi engineer, and proper measures in place regarding the structures of the building.
Article contributed by Alan Boswell.