Insurance Considerations

Are you covered? What do you need to be covered for? What aspects of insurance are your tenants responsible for? Insurance is an essential part of the buy to let process, and being armed with the relevant information can save you time and money. This ibuytolet guide details all of the insurance considerations a successful buy to let landlord should bear in mind.

Insuring a buy to let property

Getting home insurance for a buy-to-let property is absolutely essential. Every landlord should insure their buy-to-let property or properties, whether it is small one-bedroom flat or a street of houses. Buy-to-let insurance cover insures the house against flood, fire and other disasters. The type of policy needed in this situation differs greatly to a standard home insurance policy. For this reason, it is important to seek a specialist landlord policy. Specialist landlord insurance, also called buy-to-let insurance, differs from normal home insurance in the following ways:

Unoccupied property limitations

With a standard home insurance policy, when you leave your home unoccupied for more than thirty days at a time, the insurer may be able to refuse a claim. With a specialist landlord policy, insurers offer a longer period of time for vacant properties, around ninety days. This extension can be particularly useful when it comes to student rental property, due to long summer holiday periods. Before taking out a policy, assess whether the level of cover is sufficient for your needs. If you are letting a property, you need to let your insurer, mortgage lender and lessee know. If not, you could run the risk of having an insurance claim refused.

High-risk tenants

Some insurance companies will not issue cover for what they consider to be high risk tenants. These could include tenants on state benefits, student tenants and multiple single sharers. If your investment property is for student tenants, or tenants who claim housing benefit, you need to fully assess the situation before insuring the property. If you rent a house to students without telling the insurer, you could face problems when it comes to making an insurance claim. 

Home emergency cover

Home emergency cover is often listed as an optional extra on home insurance policies. Should your house face a home emergency, you are therefore covered at any time of the day or night, at any time of year. This type of extra cover can be extremely useful for landlords whose investment property or properties are not near to their place of residence. Home emergency cover can save considerable amounts of time and inconvenience.

Fixtures and fittings (and compensation)

Buildings insurance does not necessarily cover the fixtures and fittings inside the house, and it is unlikely you will be letting a fully furnished home. Even if your investment property is only part furnished the fixtures and fittings within the property could amount to a substantial amount. It is worthwhile ensuring that you have limited contents cover, to cover any damage sustained to your possessions within the house. These could include carpets, table, chairs, etc.

Your tenants should cover their own contents, as to insure something it must be owned by the person taking out the cover.

Landlord liability

Furthermore, and very importantly, you should make sure that your policy also covers you for liability against compensation claims. These could result from accidents caused by fittings, such as faulty cookers or light switches. Landlord liability cover should pay the victim any damages awarded, as well as covering any legal costs incurred. As a landlord you do have some legal responsibility for your tenants.

Loss of rent cover for accidental damage

Specialised buy-to-let insurance policies should include cover for loss of rent. That way, if the building is being repaired and because of this the landlord loses rent, the insurance will cover it. For instance: if a flood damages the house the landlord can expect to be covered, but if a tenant moves out the landlord is not.

Many insurance companies now offer tailor-made insurance policies for landlords. Whilst these can be competitively priced, they may have a higher excess level than standard home insurance policies. In higher risk areas insurers may increase excess levels still further. The result of this is that small claims will invariably have to be settled by the landlord. 

Several further points should be considered when insuring your buy-to-let property. Firstly, it is essential to declare the total rebuild cost to the insurer. If you underinsure the cost of rebuilding, the insurer is legally entitled to only pay your claims to the level of building you have insured. For instance, if you declare a lower building sum than the actual value of your property (which would be cheaper to insure), the insurer could deem you under-insured and only pay to this level.