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Landlord’s Insurance for Beginners

Landlord insurance, also commonly known as buy-to-let insurance, is something a
landlord should begin to think about even as early as when they are considering the
purchase of a property. Failure to put in place insurance on a property could leave you
with nothing to show for your money should something go wrong.
In some cases it can be extremely difficult or highly expensive to put insurance in place
for a property. For this reason it is important to have a structural and local survey done on
the property and look for appropriate insurance policies before purchasing the property.
Failure to do so could result in inflated insurance premiums, which ultimately could
severely impact on your profitability as a landlord.
Many landlords will mistakenly be under the impression that their standard household
insurance will still cover the property while they rent it out; this is often not the case.
Many household policies offer no cover for buildings, contents and important landlord’s
(property owner’s) third party liabilities, while the property is being let out. For these
reasons it is crucial to make sure you have a landlord policy or that your current
household policy can offer this cover while the property is let out.
Each insurance company offers different levels of cover. Generally there are two options
available for buildings cover and two options for contents cover. The first being standard
cover which generally covers the building and contents for the following:

�Fire, lightning and explosion
�Riot civil commotion, strikes, locked-out workers or malicious people
�Malicious damage by tenant
�Theft or attempted theft
�Earthquake
�Impact by aircraft, road vehicles or animals, falling of trees, branches, telegraph
poles, lamp-posts or pylons or falling aerials
�Escape of oil
�Storm
�Flood
�Escape of water
�Subsidence, ground heave or land slip
�Property Owners liability up to £2,000,000
Some insurers will also include free additional cover such as the following:
�Accidental breakage of sanitary fittings, fixed glass, solar panels and ceramic
hobs
�Accidental damage to underground services which extend from your home to the
public mains for which you are legally responsible
�Loss of rent or alternative accommodation
�Communal contents cover

The second option available is accidental damage for buildings and/or contents. This is as
clear as the title: any accidental damage caused to the building or contents by the tenant
will be covered. It is important to note that most insurers charge extra for accidental
damage cover and many will not offer such cover for contents. An example of accidental
damage to the building would be a tenant banging a nail into the wall for a picture and
accidentally hitting (and damaging) a pipe.
As stated above, property owner’s liability usually comes as standard with a landlord
insurance policy. This would cover you in situations such as where the tenant holds you
liable for an injury, which was caused within your property.
The excess of on a policy is how much you must pay yourself when making a claim. This
will vary between different insurers and a discount on the premium is often offered in
exchange for a higher excess. For example, if the excess on your policy was £100 then
you would have to pay the first £100 of any claim you made, regardless of the final
settlement value.
The standard excess on a policy will often vary from £50 upwards while a subsidence
excess of £1000 is usual with most insurers. The type of tenant you have in the property
can affect your excess. For instance, several students in a property will often mean your
excess will be higher than if the property was occupied by a professional family.
Something to be aware of when insuring the property is that you need to insure it for the
reinstatement value and not the sale value. The only accurate way to obtain the
reinstatement value is to have a structural survey undertaken by professionals. The
reinstatement value should take into account the following:
� The cost of building the property to its original state(take special note for older
buildings)
� Clearing the site
� Surveyor costs
� Architect costs
� Complying with government and local authority requirements
� Miscellaneous fees
Insurers will only pay as much as the building is insured for, so failure to insure for a
sufficient amount could result in expensive costs if a claim should arise. At the same time
too high a reinstatement value could result in you paying a higher premium than is
necessary � remember you pay this every year, year in, year out. Whilst there are tools
available on-line which aim to provide a reinstatement value, based on several factors
you in-put, we have found they often produce inaccurate results.
Most insurers will index-link your policy meaning that the sums insured will increase
each year based on information from the Association of British Insurers ABI). This
means that as long as your original reinstatement value is correct, the correct value will
be maintained in subsequent years.
The Financial Service Authority (FSA) regulates all British insurers.
Due to this regulation insurers must provide what is known as key facts or a policy summary for any insurance policy they have available. These are perfect if you want a quick overview, and
to see instantly what cover the policy does, or does not, provide.

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Posted on 04 Aug 2006 by Moderator

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