Do you have landlord insurance? You should

by Mar 3, 2021Rental

What is landlord insurance?

Landlord insurance is a policy that offers financial cover to landlords when renting out their property, it’s not mandatory to have cover but it can save you money and ensure peace of mind if disaster strikes.

If you already are a landlord, or are considering renting out a property you own, it’s good to ensure you have cover, and the right cover!

Is landlord insurance the same as building insurance?

No, landlord insurance is a range of different covers specifically designed to protect landlords and the properties you’re renting out. While both landlord and building insurance will cover you if there is damage to the property, building insurance might not cover you if you have rented out the property.

It’s not a legal requirement for you to have landlord insurance (sometimes known as buy-to-let insurance) but, given the kinds of issues that rental properties can run into, we really recommend you get it.

Landlord insurance includes things such as contents and building insurance but with extras included.
Insurers go through a risk assessment when looking at covering your property where they evaluate how likely it is for you to make a claim.

Landlord insurance is an umbrella term, it involves multiple types of coverage which can be bundled together to make one policy, its entirely up you what you want to include in your policy but the more you add the more it will cost.

Here are the following options you can add to your policy:
  • Legal expenses
    This covers any legal costs when it comes to disputes or disagreements with tenants, for example, breaches in their contract which may result it court proceedings.
  • Buildings cover
    This covers the cost of repairs or even rebuilding your home, for example, fire or storm damage (hail, Lightning and wind) – some insurances won’t cover flood damage caused by weather, especially if you are living in a high-risk area.
  • Loss of rent
    If your tenants are unable or refuse to pay rent.
  • Eviction of squatters
    This covers the cost of legal fees when your tenant refuses to leave – if you have an unoccupied property and have a squatting issue this can be covered in ‘Unoccupied Property Insurance’.
  • Public liability
    This covers legal fees for claims made against you if a visitor or tenants suffers an accident which resulted in an injury.
  • Accidental/Malicious damage
    This covers against damage made to the property either by your tenants, burglars or vandals.
  • Contents cover
    Covers YOUR contents in the property, from theft or damage (not by your tenants) or damage from fires or flooding.
  • Property damage caused from illegal cultivation of drugs
    The damage caused by drug can be extensive and costly, examples of damage can be, Extensive water damage, condensation from irrigation systems, changed lighting, installation of ducting and extractor fans, damage to electrics.
You must ensure the following to avoid your policy being voided:
  • Your property must be fitting with a smoke alarm
  • Carbon monoxide alarm must be in place
  • Your electrical equipment needs to be checked and kept up to date with a safety certificate
  • Gas equipment also needs to be checked and kept up to date with a safety certificate

Unoccupied Property Insurance

Unoccupied home insurance is a specific type of policy if you were leave your home unoccupied for 30 days or more, this is in addition to your current insurance policy.

You may need this type of cover when:

  • Waiting for a tenant to move it
  • Having building work done
  • Awaiting to sell the property
  • The person living in the house is going on holiday for an extensive time

Unoccupied Property insurance can cover:

  • Fire
  • Storms
  • Theft and attempted theft
  • Damage from impact
  • Vandalism
  • Flood
  • Water damage
  • Oil damage

How to keep the cost of insurance down

  • Being choosy about who you rent your property
    Who you rent out your property to can make a difference in your premium, working professionals prove the most straight forward tenants to rent to, where as a student or someone claiming DSS has a higher risk of being unable to pay.
  • Minimise vacant periods
    Generally, insurers aren’t keen on insuring property that are unoccupied, due to the heightened risk of burglary and vandalism, if the property is unoccupied for more than 30 days, you’ll have to get additional cover, if you don’t your current cover can be voided.
  • Invest in security
    Having additional security in place lowers your chances of break-ins and therefore reducing premiums.
  • Neighbourhood watch areas.
    In terms of security this can also have a positive impact on premiums.
  • Saying no to pets
    Having an animal in the property can heighten the chance of damages being made to the property but this can be avoided by charging tenants a ‘pet tax’.
    Support animals are not considered as pets.

If you want to use ‘loss of rent’ cover due to non-paying tenant then policy would usually require the following to be in place to help reduce premiums or qualify for the insurance

  • Have proper tenancy agreement
  • Carry out credit checks
  • Have a guarantor on the rental
  • References from previous landlord and employers

Contact the landlord accounting experts

If you’re planning on purchases a property as an investment to rent out, its good to consider the area before purchasing, places like Eastbourne for example – a high risk floor area, can affect Landlord insurance.
High crime rate areas can also put your premiums up.

As you can see there are a lot of things that effect insurance and a lot of things that can go wrong, so having your rental property insured is very important and not having cover or the correct cover can be costly.

Here at Diamond Accounts we’re accountants committed to helping landlords keep their costs down and we’re always just a call away!

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