Landlord Insurance

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Anyone in the market to buy property as an investment to let might find that talking to a certified insurance agent or broker first will save headaches later, as well as make certain decisions much easier. A sit down with an agent registered with the Financial Services Authority (FSA) will quickly illuminate the range of problems that might arrive when buying-to-let whilst a brief look at what kinds of insurance are available gives a quick overview of the problems faced by landlords. Insurance coverage is not only a necessity, but a primer in reality.

What is Landlord’s Insurance?

First off, Landlord’s insurance is not simply beefed up Homeowner’s insurance. Truth be known, if you plan on renting out your current home and don’t inform your agent of the change, you’re liable to wind up not covered should something happen. If you’ve decided to become a landlord, either by renting your current residence or investing in a Buy-to-Let, it’s best to go to an expert, a firm that regularly handles Landlord’s Insurance. There are plenty on the Internet, so shopping to compare price and services offered is a good starting place.
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What is Covered by Landlord’s Insurance?

There are a number of issues directly covered by policies under the category of Landlord Insurance, not the least of which is Subsidence. Whilst the dictionary defines this as “to sink or fall to the bottom,” in rental terms, it might be interpreted as “the bottom fell out of the market” ie. no one wants to rent your property. It could also mean that a sinkhole opened under the foundation and your newly-purchased house or flat so that it is slowly moving toward China, but that would be covered under the Landlords Buildings Insurance section.

Buildings Insurance means just that, but coverage should reflect the cost to rebuild - not what you originally paid for the building. As implied, this covers any buildings that may be part of a complex (or stand alone) as well as any items that would normally be left behind when residents move out, such as perimeter walls, patios and fixtures and fittings. Causes of the damage include fire, flood or pipes bursting. Then there’s Landlords Contents insurance. The level of this coverage is dictated by the amount of furnishings you provide. Unfurnished rentals only require coverage for carpets or floor covering, curtains, and whatever appliances have been provided under the Assured Shorthold Tenancy Agreement. (If your agent doesn’t mention this early on, then it might be worth finding another.) The Contents insurance does not cover what your tenants bring with them into the dwelling though - that is their responsibility.

If something happens to the building (that is covered) during the course of the let period, you are responsible for finding alternative accommodation for your tenant, which in terms of insurance is usually up to 10% of the building sum insured. Thus it is advisable to get the insurance or you might wind up with permanent house guests.

What is Required?

Neither Building nor Contents insurance is required by law, though if you are carrying a mortgage, no doubt your Bank will require this coverage. Public Liability Insurance is also not a must, however, it covers such things as “bodily injury to, illness, disease or nervous shock of any person other than employees; loss of or physical damage to physical property belonging to others; loss arising from trespass, nuisance or interference with any easement of air, light, water or way; happening during the period of insurance.” In other words, if anything happens on the spot of earth you’ve mortgaged, you’re responsible.

Then there’s Employee Liability. What employees I hear you cry? The plumber you call brings his clumsy apprentice, who breaks his leg rolling down your stairs because the cat got underfoot. Not your fault, you say? Yes it is. It happened on your spot of the earth, and you called them. Electricians, roofers, the girl who cuts the lawn - all are employees, even if there just for an hour.

The bottom line is, buying a property to rent or converting your current home to a rental is a complicated endeavor that requires a great amount of planning and protection against evil, accidental, or natural happenstance. While some consider Landlord’s Insurance as an unnecessary expenditure, it focuses on the “necessary” aspect of renting a house out.

Should you require more information on Landlord’s Insurance, we would recommend you look at the FSA or the Association of Residential Letting Agents websites.