The private rented sector is booming in the present economic climate, as people are finding it difficult to buy houses to live in. So if you have a property to let out, you probably won’t have a problem finding tenants.
However, one thing you may not have realised is that you can’t use ordinary home insurance cover for any property you are letting out for profit. You would find you weren’t covered if anything happened. What you need is landlord insurance.
The term landlord insurance actually includes several different types of cover. The primary cover is “core cover”, but there are others in addition.
•Core cover. This is the basic cover you must have. It insures you against damage to the property while it is let. For instance, if there is a serious incident such as fire or flood, not only will you have to organise major repairs, but your tenants will have to move out, at least for the time being. Core cover in addition to the cover for the repairs will include up to 30% of the property value to indemnify you for the loss of rental.
•Public liability and property owners’ liability. These are separate elements of your landlord insurance, but you need both. Property owner’s liability protects you against claims made by tenants – for instance if a tenant fell down the stairs and sued you because a stair rod was loose, you would claim on property owner’s liability. However there are always various visitors coming into the house – either to visit the tenants or to do jobs as tradespeople – and injury to any member of the public would be covered under public liability.
•Landlord’s contents insurance. You are not responsible for insuring tenants’ property. Landlord contents insurance covers you against damage to, and theft of, furniture and soft furnishings, or goods you provide for the tenants’ use such as a washing machine or refrigerator. (You should clearly advise your tenants that they are responsible for insuring their own belongings.)
•Legal expenses. Unfortunately it often happens that tenants stop paying the rent, behave in a highly anti-social manner or prove a nuisance to other tenants, and need to be evicted. If they refuse to leave you have to take them to court. This could be very costly if you’re not insured. Even if costs are awarded against the tenant, they may refuse to pay.
Many insurers provide a landlord’s comprehensive insurance policy, which covers all these elements. You can also take out a single policy to cover more than one property if you have them. Premium costs are calculated individually, on the basis of the property location, type of area, number of tenants, and number of previous claims if any.
If you are just starting up in letting property, landlord insurance may seem like just another expense which you can do without. However it just takes one incident to make you realise how essential it is! So don’t be caught out. Talk to a specialist landlord insurance broker for advice on the best value policies, and make sure you are protected.