Insuring Property & Liabilities
Some Tenants and types of lettings carry higher risks and some insurers are reluctant to cover such risk, for example students and Housing Benefit Tenants or properties converted for HMO (House in Multiple Occupation). The specialist insurers we recommend will be able to advise you on the best options for insuring these types of risk.
Employers' Liability.
As a small time or part-time Landlord, you might think that Employers' Liability is the last thing you need - you'd be wrong! Usually buildings policies will provide some kind of Employers' Liability cover. This covers claims for death or injury to anyone you employ at your property, for example you may employ, on a casual basis only, a gardener / handyman, a property repairer or a painter and decorator. This is why you should have a Liability Insurance for any tradesmen you employ [but the fact is few people do check this].
Third Party or Property Owner's Liability.
First and foremost the Landlord should be concerned about the substantial risks now posed by third party liabilities.
In the litigious society in which we now live, anyone operating a business, which you as Landlord is certainly doing that, can easily find yourself on the wrong side of a lawsuit which can seriously damage your wealth and probably health as well! You only need to watch day-time TV for a brief spell to see how many law firms are touting for the business of anyone who has the slightest inkling of a claim.
Make sure your policy includes Property Owners Liability up to something like £5 million of cover. It is vital that you are covered in this way against death, injury or damage to individuals on or near your property for example, tenants, visitors and guests, meter readers, postmen etc. Local Authorities and Universities will normally specify a minimum amount of cover needed when you let to housing benefit tenants or students. Ironically, it's this third party liability, which represents the greatest risk to the Landlord and is often overlooked!
You are responsible for the well being of all tradesmen, visitors and Tenants to the property. The actions of your Tenants could make you liable for an injury to a third party. What a barmy world - but this why you need liability cover specifically for a rented property.
Building Insurance.
To protect your investment, you need to cover your building against all insurable risks to the full replacement cost, including the cost of clearing the site after complete destruction and all professional's fees.
Remember, the replacement cost is not necessarily the same as the market value of the property or the price you paid for it! If you under insure your building you could fall victim to the insurers averaging - you will not get the full amount of any claim, so it is in your best interests to work out the replacement value accurately!
You can get an accurate insurance valuation if you go to the Association of British Insurers (ABI) website and use their Building Costs Calculator for home owners. Better still and particularly in the case of unusual properties, such as old, listed, conservation area, thatched or other specialist properties to get a professional insurance valuation carried out by a chartered building surveyor.
Most insurers will index link the annual premiums to the Retail Price Index so that you maintain an accurate insurance value over time, but of course this is all dependent on you getting the value right in the first place.
It's important to remember to get permission in writing from your mortgage lender, insurer and landlord (leasehold property) before you let your property to tenants. This is very important as your insurance cover could be null and void if you fail to do this.
Perils Covered: The perils usually included in most popular building risks policies include: Burglary and Theft, Bursts and Water leaks, Fire, Smoke, Storm and Flood, Subsidence, Vehicle Impact, Aircraft Damage, Lightening, Explosion and MaliciousDamage.
Loss of Rent: Most specialist landlord policies will cover loss of rent in the event of a major catastrophe where the building is rendered uninhabitable. See also Rent Guarantee.
Unlike owner occupied properties, landlords do not normally need full contents cover.
Contents cover on a typical owner occupied household could be anything from £35,000 and upwards. A tenanted property would typically involve a much lower figure as the tenant is responsible for much of the contents. This is particularly so when the property is let unfurnished or partially furnished - an increasingly popular trend.
Limited Contents cover would typically be for in the region of £10,000 to £15,000 and would cover landlords for the loss or damage to items supplied such as carpets, furniture, pictures, ornaments, curtains and blinds, electrical equipment provided, such as Hoovers, TVs, light fittings, and kitchen equipment including fridges, washers, dryers, dishwashers etc on a new for old basis.
Full Contents cover may be more appropriate where the property is let on a fully furnished basis. Where a house is let fully furnished, especially where this is the landlords' main residence with valued contents, then full contents cover is needed. The landlord should also complete a full inventory of contents, along with photographic evidence and schedule of values. The sum insured should be adequate to cover the replacement value of the contents in total.