Mould story

Whether your property investment is a little cottage in Grimsby worth a few thousand pounds or a substantial portfolio of commercial and residential properties worth millions, you are a Landlord and will have encountered Landlord Property Insurance. Menasche Scharf takes you through the maze.

 

Each class of insurance business is underwritten with its own factors and considerations. As Landlord Property Insurance is a different class of business from Homeowner Property Insurance, a standard buildings and contents policy will not suffice for the residential and commercial property landlord.

Over the years the UK property market has flourished and with it the insurers have designed tailor-made policies to meet landlords’ needs.

Landlord Property Insurance is not a legal requirement, but it still makes very good sense for this reason. If a mortgage is to be secured on your investment property, the mortgage offer will include a condition, to have the property insured throughout the term of the mortgage. In fact it is not possible to obtain a mortgage without insurance in place.

Where to purchase your Landlords Property Insurance

You are almost ready to exchange contracts on your investment property and your solicitor asks you to supply buildings insurance, especially, as mentioned above, if the property is to be purchased with a mortgage. 

If you are purchasing a simple residential house, as with everything today, you can try buying insurance online. However, this can have disadvantages. Even if your property can be ‘squeezed’ in to the data capture form, after paying, you may end up with a few surprises. On looking at the certificate it may well say that the cover provided is subject to a list of requirements, i.e. specialist security locks, CORGI certified appliances etc. Should the property not meet these requirements you could either cancel and start from square one in obtaining your Landlords Property Insurance or pray that you will not need to claim! 

Another disadvantage of buying Landlords Property Insurance online is, you may require mid-term amendments such as changing the name of your mortgagee noted on the certificate. For this you will have to contact the company’s call centre and it can end up being a tedious process.

What if your property is a house divided into 2 or 3 flats, or is not standard build? What if you property is a shop to be let to a retailer? Whereas for example motor insurance information can all be entered on a data capture form on line, every property is different and will not always be able to fit into the standard tick box question form.

This is why Property Insurance Brokers are still in business! 

Norwich Union, Zurich, AXA and Royal Sun Alliance are a few of the major players in the insurance property market and most policies including those purchased on line will originate from them. Those sold online will only be appropriate for few. A good broker will understand your needs in a few questions and will usually have you covered instantly, be available for policy amendments and claims assistance.

Your requirements

If you are purchasing or re-mortgaging a new investment, by perusing the mortgage offer and the surveyors report, you will be able to see what level of cover is necessary. Policy renewal will be every 12 months and if you are with the same lender, the requirements stay the same although the sum insured may need to be increased.

If you are looking to insure your investment property but have no offer or surveyors report to refer to, your broker should be able to advise you what cover is available.

What am I insured for?

The best way of understanding what you are covered for is by looking at the insurance policy schedule. 

Standard cover will include damage from Fire, Lightning, Aircraft, Earthquake, Malicious Damage, Theft, Storm, Escape of Water or Oil etc. Most policies will extend to ‘all risks’ which includes accidental damage i.e. if you foot goes through a floorboard etc

Amongst other extensions to your cover you can add, (and your mortgagee may well require this) terrorism cover and loss of rent. The latter is in the event of the property being damaged and therefore resulting in the rent not being paid if the property is not fit to be occupied.

Subsidence will usually be included except in some areas. In fact most London postcodes are high risk subsidence areas. In high risk areas, subsidence cover will only be available once a completed questionnaire has been submitted to the insurer.

If you are purchasing a property to refurbish or redevelop, then only FLEA cover will be available (Fire, Lightning, Aircraft and Explosion) and usually at an added premium.

It is always important to inform the broker or insurer of the exact situation with the property, i.e. if it is occupied or not. It may cost more but it’s worth the price, as by providing the wrong information you could end up with no cover at all.

In all cases you will be covered for public liability. This can be for anything from £2, million to £10million and will cover you for all liability to anyone or anything that could be damaged from your property, including damage to tenants. 

If you own and insure for example, a block of flats and have your maintenance workers on site, it will be necessary to add on to your policy Employers Liability.

Even though your property will be occupied by tenants, especially in the case of residential properties, you possibly will have your own furnishings in the property which you may want to insure. This can be added under Landlords Contents Insurance.

Sum Insured

It costs pretty much the same to build a house in London as it does up North. So although market prices are sky high in the Capital, rebuild sums are not. Hence, when it comes to insuring, you are looking for the reinstatement value also known as the ‘declared value’. This figure can be found in the surveyors report.

The good insurers add on to the declared value 25 -50% included in the premium paid, just in case you have underinsured. This is why you will notice two figures on the schedule, the declared value and the sum insured.

We can see Landlords Property Insurance is a completely different product from Homeowners Property Insurance. The option for terrorism cover, loss of rent and employers liability cover are a few visible differences. Aside from this, let property is a different class of insurance altogether, presenting to the insurance underwriters different risks and therefore requires specialist Landlords Property Insurance.

Of course you should shop around for a good quote but also check that you are getting the best cover. As a landlord you deserve the best!