Renting out a flat or a house involves a number of considerations. High up there among them should be obtaining landlord insurance. For a landlord, standard buildings and contents insurance on their own home - their primary residence - does not extend to cover rental properties. This means that should something happen to the building structure or its furniture to damage it, such as a fire, a storm or even vandalism, you will not be covered for insurance purposes.
The same may be true for landlords who rent out rooms in their own property in which they themselves are living. Whilst they may have a valid buildings and contents insurance policy, there may be clauses in the policy that prevent it from being used when tenants are in residency, in which case the insurance cover on the whole property - including the landlord's living quarters - may be invalidated.
As Alison Steed wrote in the Telegraph of 03/05/2007: "With the amount of rental property in London alone amounting to £146 billion, there is a definite need for landlords to insure themselves." It is therefore important for landlords in all situations to check what is and is not acceptable with their current insurance provider.
Landlord Insurance
Most of us are familiar with the requirement for insurance. Landlord insurance is an insurance package designed to offer comprehensive risk cover for one or more rental properties, and includes cover for scenarios in which the landlord rents out his own property. Not only do they provide comprehensive cover for most situations in which damage to the property would be sustained, but the policy will also provide liability insurance, often for several million pounds. This would protect the landlord financially in such an event where the tenant and/or members of the public are injured (or worse) by the rental property, or when a disaster befalls the property.
Buildings Insurance
With a rental property it is a necessity to have buildings insurance in place at the very least. In fact, if a mortgage for the property is required, the lender will most probably make it a statutory requirement to have insurance in place in order to protect their financial interest in the property.
Buildings insurance policies for landlords are designed with the rental property market in mind. One important consideration here is the sum for which the building should be insured. You will only need to insure a sum equivalent to the cost of rebuilding the property should it be totally destroyed - not the market or sale value of the property! It seems like common sense, but you'd be surprised at the number of landlords who over-insure their rental properties.
Contents Insurance
One factor sometimes overlooked by landlords is contents insurance. You might ask why bother with contents insurance if the property is going to be filled with the tenant's possessions. Of course, much is dependent on what the landlord has inside the property. If it is fully furnished it would be irresponsible not to consider contents insurance. But what if the property is supplied unfurnished? Is contents insurance really that applicable then?
The answer, categorically, is 'yes'. If the property is let unfurnished or part furnished, you'll have the option to select limited contents cover on your landlords policy. This will provide insurance in the event that items like carpets, curtains, light fixtures and fittings, and kitchen appliances are damaged…even if the damage was accidentally caused by the tenant.
Moreover, your landlords insurance can also provide liability protection in relation to contents insured in the property. So should the supplied cooker injure a tenant, or poorly fitted carpets result in a claim for injury being made by the tenant against the landlord, the insurance policy will pay out for damages awarded.
Total coverage
Landlords insurance provides those letting property with peace of mind that should something go wrong with the property while the tenant is there, they are covered financially. Landlords insurance can even provide rental protection. If the tenant vanishes leaving you with a vacant property, or defaults on the rent, your landlords insurance policy will pay out…sometimes for up to 12 months if the property remains vacant over that time period.
Keep yourself up to date
The most important thing to remember with landlords insurance is to make sure that once you have it in place that you always keep it up to date and valid. Changes in your circumstances, such as converting a property from single tenant occupancy to an HMO, could invalidate your existing policy. Equally, if you fail to renew your policy on time you could end up with no protection, perhaps when you most need it. If a disaster were then to befall your rental property, you'd only have yourself to blame if you failed to send off the renewal cheque on time!
What Landlord Insurance is not…
It is probably a good idea to clarify here what landlords insurance does not do, as well as what it does do. Taking out landlord insurance does not mean that the tenant's personal possessions are covered. The tenant will need to arrange separate contents insurance for themselves.
Another point to consider is the rental insurance side of things. This should not be confused with the Rent Guarantee Scheme, which provides landlords with a written guarantee instead of a cash deposit. It is also nothing to do with the Rent Deposit Scheme.
Emergency maintenance for issues such as burst pipes, a leaking roof or a blocked toilet is generally not provided as standard as part of the landlords insurance package either. If you want the total peace of mind offered by an emergency maintenance contract, you should look to arrange this type of cover separately.
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