Landlords & Insurance

What you should be aware of when deciding on your landlord insurance


1. Introduction

Rentify have produced this guide to insurance with the knowledge that there is a wealth of choice out there for landlords, both about provider and policy. In order to make the right decision for you and your property, you must know your options and your responsibilities. That is precisely where this guide comes in.

Rentify will give you all the information you require to make an informed decision about insurance. Although insurance is not a legal necessity for landlords, it's to be highly recommended if you want to look after yourself, your property and any income from it.
From the smallest nail polish spill to the longest-running legal battles, you need to make
sure you are not left majorly out of pocket.

Please remember that this is just a guide. Each policy will have its own individual set of regulations with which you must comply for the policy to be valid.

We understand your time is valuable. If you’re overwhelmed with managing your property, we can do it all for you through our let my property or full management services or call us today on 033 3014 8505 When such a valuable asset as your property is at stake, you should address any doubts
right away. Rentify's expert team is waiting to answer any questions you may have about insurance issues (or any others!). Call us on 0333 240 2222 or emai help@rentify.com

2. An overview

You will require specialist landlords insurance. A landlord needs to protect against many third party risks which an owner-occupier does not. Obvious examples might be damage caused by the tenant or delayed income from rent arrears. There are a number of policies on the market to cover all these issues.

So make sure the insurance company knows that your property is being rented to tenants and is not owner-occupied. Basic home insurance will usually be declared invalid if it is discovered the property was being rented out.

Broadly speaking, cover is available in the following areas, whether as a standard part of any policy or as an optional extra:

  • Buildings Insurance

  • Contents Insurance

  • Accidental Damage (for that nail polish spill...)

  • Liability Insurance (if the property injures someone or damages their belongings)

  • Legal Expenses and Rent Guarantee (often paired together)

You may consider joining an accredited landlord association as good deals on insurance are often made available to members.

If you have multiple rental properties (generally over five), many insurers offer special deals to have them covered by one policy

3. Details, details...

Buildings insurance for landlords

This covers the risk of damage to the structure and permanent fixtures and fittings of a building against such things as fires, storms and floods.

If you have a mortgage, the lender will usually insist that you have buildings insurance. Even if they don't or you have no mortgage, it's advisable to get it; it's even more than advisable in fact, if that makes sense!

When taking out buildings insurance, you may want to consider whether the policy addresses the following issues:

  • Damage caused by fire, smoke, explosion, lightning, earthquake, flood or storm.

  • Damage caused by acts of terrorism (usually an optional extra).

  • Damage caused by vandalism or malicious acts such as theft or attempted theft
    (including replacement of locks and keys).

  • Damage caused by subsidence, ground heave or landslip.

  • Damage caused by escape of water or leakage of oil.

  • Damage to underground pipes and cables.

  • Damage to or breakage of any fixed glass.

  • Malicious (i.e. deliberate) damage caused by tenants.

  • Costs incurred when tracing and accessing the source of any oil or water leaks.

  • Providing alternative accommodation to a tenant if they have to move out because of damage.

  • Providing cover for loss of rent if the tenant has to move out following damage caused by an insured event (i.e. like the events listed above). More often than not, this is an optional extra.

  • Providing cover for an emergency such as a break in or burst pipe.

  • Providing cover for the rebuilding of the property (the cost of this is usually lower than the purchase price).

The upper limit on the cost for covering each of these issues will depend on the policy. You may also have to pay an excess if you claim. Make sure to check the precise terms of each policy.

Typical restrictions

These are guidelines to keep in mind and you must check individual policies to see whether they apply and to find out the specific details. Optional extras may be available to cover some of these restrictions:

  • You probably won't be covered for any damage to hedges, fences, awnings or the like.

  • You will not be covered for general wear and tear or, usually, damage that occurs slowly over time like damp or rot.

  • You may not be covered if the loss or damage resulting from the property being used for an illegal purpose.

  • You may not be covered if the damage comes from exposed water tanks or pipes that have not been lagged.

  • You may not be covered if the damage is the result of frost damage in any outbuildings (including garages).

  • Again, you may not be covered for malicious damage or theft by the tenant if it this does not come as standard.

It is advisable to take account of any insurance implications in the tenancy agreement if they will affect both landlord and tenant. For example, if the insurance policy's upper limit for the cost of providing alternative accommodation to the tenant is £40,000 (say), then you may want to limit liability in the agreement to within this level.

Check which terms come as standard in a policy and those which you may have to pay extra for. For example, malicious damage caused by a tenant is often not covered as standard but as an optional extra (often - paradoxically - under Accidental Damage!). Be aware!

Contents insurance for landlords

This covers the risk of damage to or theft of contents of the property which you have provided as landlord, anything from furniture to electronic equipment to carpets and curtains.

You are not obliged to insure any of the contents provided by the tenant.

Consider whether the policy will cover you for such circumstances as:

  • Damage to or theft of your contents caused by any of the same events as those for buildings insurance (see above).

  • Replacement of locks if keys are stolen.

  • Damage to or theft of contents in your garden.

  • Damage to or theft of contents of any outbuildings, like a shed.

  • Damage to or theft of contents in any common areas of the property.

Typical restrictions

Check your policy for these or similar terms and find out whether optional extras
may cover them.

  • Some items may not be covered by contents insurance if they are deemed to be 'high-risk' (like that Picasso you've got hanging around). Check with your provider if this is the case.

  • Some insurers will not allow you to get contents insurance without buildings insurance, unless you have buildings insurance with another provider. An example of this is when the landlord is the leaseholder and the buildings insurance is held by the freeholder.

  • You may not be covered if the loss or damage resulting from the property being used for an illegal purpose.

  • You may not be covered if the damage comes from exposed water tanks or pipes that have not been lagged.

  • You may not be covered if the damage is the result of frost damage in any outbuildings (including garages).

  • Again (again), you may not be covered for malicious damage or theft by the tenant if it this does not come as standard.

When calculating your profit from renting for your tax return, buildings and contents insurance can be deducted as expenses.

Accidental damage

You may expect this to be covered as standard but more often than not it isn't. It covers things like our nail polish spill: damage not caused by negligence, recklessness or misuse and happening at a clear point in time (also know as 'done by accident'!). It will usually apply to both buildings and contents insurance.

An example of accidental damage under buildings insurance might be putting your foot through the ceiling while checking something in the roof.

Accidental Damage also often covers malicious damage caused by tenants. Check whether this includes people invited into the property by the tenant.

Property owners' liability insurance

This should cover you for legal costs and damages if the property causes injury to someone or damages their belongings (the 'someone' in question will usually be the tenant but really could be anyone).

You may want to make sure the policy extends to any deaths caused by the property. This may include manslaughter charges, if the breach of your statutory duties is considered serious enough. A little dark, sure, but this is what insurance is all about: worst-case scenarios...

You may also consider whether you need to get separate Employer's Liability Insurance for when you employ someone to do work on your property. If they are injured or have their belongings damaged by the property, standard Liability Insurance may not cover it so always check with your insurance provider.

Sometimes Liability Insurance comes as standard with buildings and contents insurance.

Legal expenses and rent guarantee

The 'Legal Expenses' side should cover your costs for pursuing legitimate legal claims against any breaches of the tenancy agreement.

The 'Rent Guarantee' side should cover you for any unpaid rent (i.e. rent arrears). It may also cover you for loss of rent due to damage to the property, although this may be covered elsewhere or be a further optional add-on.

Even though they address different issues, these often come together as an optional extra to a policy. Together they cover you for the main financial losses which might be incurred when a tenant breaks the tenancy agreement.

Keep in mind whether you want to be covered for:

  • The legal costs for evicting squatters

  • A short grace period of some continued payment after repossession, if a tenant has abandoned the property, as long as you are trying to re-let it.

Typical restrictions

Again, these are guidelines to keep in mind and you must check individual policies to see whether they apply and to find out the specific details:

  • The provider will often not pay legal expenses if they think it has insufficient prospects of being successful

  • The maximum period for which you can receive unpaid rent is generally 12 months

  • Any event you are claiming for began before the date that the cover started

  • Any event which occurred a sufficiently long time in the past, even if the policy had started when it happened

  • Some policies will not cover you if the amount you plan to dispute is sufficiently small

  • The vast majority of insurers will only pay out if you carried out a credit check on the tenant before the start of the tenancy. The credit check available through Rentify will cover you for this and all at an unbeatable price!

General restrictions applying to landlords insurance

  1. Limits of cover

    Remember: In the majority of cases there will be upper limits on the costs the insurance company are willing to pay, as with most insurance. These will be clearly set out in your policy and will of course vary depending on what they are covering.

    For example, under your buildings insurance you may be covered for costs of up to £5,000 to trace a water leak, but only £500 for the cost of replacing the locks after a burglary.

  2. Unoccupied properties

    Landlords are more likely to have unoccupied properties than owner-occupiers and this is reflected in the policies. Buildings and contents insurance for landlords both cover unoccupied properties but only for a certain period of time:

    • Typically they will cover unoccupied properties for up to 60 or 90 days

    • The excess may well go up within this time period as the risk increases. For example, if cover of an unoccupied property lasts for 90 days, the standard excess on claiming for vandalism may go up from £100 to £500 between days 45 and 90

    • If you think you will need an unoccupied property covered for a longer period, specialised policies are available

    • Check each individual policy for the specifics!

Types of tenant

Although most policies should cover most types of tenant, watch out for exclusions. For example, a policy may exclude letting to:

  • A tenant on Housing Benefit

  • Asylum seekers

  • Students (if you are letting to students, certain rules and regulations apply and you may need a specialised policy to reflect this)

Alternatively, the premium may be increased for these tenants. Be aware of this and check the small-print!

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