Introduction - buy to Let insurance or
Landlord Insurance, for residential properties, the terms are interchangeable
refers to a form of building Insurancethat you will be required to
effect, before your lender will release funds to you for the purchase. There are
other products that are sometimes referred to as Landlord Insurance products but
we will deal with them later as Building Insurance (sometimes with Contents
added) is generally the policy most persons are interested in buying.
Satisfying Your Mortgage Lender - Once you
have located your property and have found a suitable mortgage, the lender will
require you to effect Building Insurance prior to releasing the funds to your
solicitor. They will want their interest noted on the policy document to and
they will want confirmation that what ever policy for building insurance you
have located (and it really is a matter of personal choice) satisfies the
conditions as stated in the Council of Mortgage Lenders
Handbook. This book provides detailed instructions for conveyancers acting on
behalf of lenders in residential conveyancing transactions. The following list
all the lenders belonging to the Council of Mortgage Lenders:-
Protecting Against Perils - The
handbook details the cover your lender will require to enable you to borrow
money against the property. It is important that you check your policy wording
as unless your cover meets with the requirements, you will be unlikely to secure
funds for your purchase. The perils mentioned as a requirement are as follows:
fire, lightning, aircraft, explosion, earthquake, storm, flood, escape of water
or oil, riot, malicious damage, theft or attempted theft, falling trees and
branches and aerials, subsidence, heave, landslip, collision, accidental damage
to underground services, professional fees, demolition and site clearance costs
and lastly public liability.
The Cost of Buy to Let Insurance - the price you will pay for your
landlord insurance will vary from insurer to insurer, most will require a fairly
similar set of "underwriting information" and based on your answers, a premium
will be provided. The most important rating factors for this type of
policy include, the postcode, the rebuilding cost and the type of tenant that
occupies the property. When phoning for your quotation or completing the online
form, you should have a good idea of the rebuilding cost, if you are obtaining a
loan on the property, this information will be provided by the lender, usually
on the valuation report. It is vitally important that you insure for the full
reinstatement cost of the property.
Other covers available to the Landlord
- although Buildings Insurance is the most popular form of policy
purchased by a Landlord, there are a number of other covers which
could be considered. There is no legal requirement to purchase any it
is a matter of personal choice. The following are available:-
Landlords Contents Insurance - this cover can be purchased as an additional
section under the Building policy or in some cases (where you are not
responsible to insure the building) as a stand alone product. The policy will
cover the Contents within the premises owned by the policyholder for the usage
of the Tenant. It must be remembered that this policy will not cover Tenants
Contents, they must arrange this cover themselves. One of the advantages of
buying this policy is that it will provide you with the public liability cover
attached to the ownership and supply of the Contents
Legal Expenses Insurance -
becoming a Landlord can be a very daunting and complex experience, the purchase
of Landlord Legal Expenses cover can help to alleviate some of the worries. A
policy can be obtained that offers cover for Legal Expenses following a breech
of the tenancy agreement, cover can usually be extended to included Rent Arrears
Pursuit and Legal Defence cover.
Emergency Assistance Cover -
this policy will provide a sum insured following a domestic emergency at the
insured address.( failure of the primary heating system is a typical example).
There is usually no excess and no limit on the number of claims that can be made
in anyone year
Rent Guarantee - this type of
policy will provide an Indemnity if the tenant fails to pay the rent. The
premium is usually calculated on the amount of rent receivable, in most cases
references must be taken before cover can commence.
Useful Tips - most landlord buy to let insurance policies have
their wordings based on a fairly standard home insurance wording, the
perils are almost identical, with the main alteration being that cover
in respect of” loss of rent” is covered rather than “Alternative
Accommodation cover” .It should be remember that cover under this type
of policy will be provided for loss of rent caused by an insured peril
such as a fire or a flood, it will not cover you for tenant default.
If you are worried about loss of rent because of failure to pay by the
tenant, you will need a separate policy, typically referred to as a
rent guarantee policy.
The amount covered under a buildings insurance policy in respect of
loss of rent is usually 20% of the sum insured, for example, if your
sum insured is £125000, you will have a loss of rent sum insured of
£25,000. Make sure this is adequate for your needs.
Always check your policy wording carefully and make sure that there
are no particular exclusions. When renting property many people worry
about damage actually caused by the tenant, whilst it is possible to
include Accidental Damage, it is not usual (although not impossible)
to have cover for malicious damage by the tenant. Policy wordings are
known to exclude damage caused by persons legally entitled to be in
the property. So if the tenant manages to break the bath or wash basin
or some glass in a door, then a claim can usually be made providing of
course you follow your insurer’s claims conditions. However if you
inspect the property and find that the tenant has daubed graffiti on
all the walls, then that will not usually be a valid claim.
When insuring contents, you will only be able cover those items deemed
to be landlords contents (those contents which you own and are
supplied in relationship with the tenancy) If the tenant has any
contents of his or her own, or any personal effects, they will have to
make their own arrangements for cover. Under most landlord insurance
policies, cover in respect of Theft is restricted to forcible and
violet entry, so for a claim to be valid there must be signs of a
break in.
When calculating your buy to let insurance premium, the same
principles and criteria are usually applied to rating, the insurer
will want to know the location of the property, its post code and the
construction method employed. The rebuilding cost will also be
required as will details of any previous claim. As well as these basic
details, you may have to supply details of the tenant. Whilst personal
details are not required, such as tenants name, age & occupation, you
may have to confirm if they are working or on benefits or a student.
You may also have to confirm if the tenancy agreement is between your
self and the tenant or a third party & the tenant. This can have a
great impact on the premium; generally speaking if you rent your
property to a local authority or a housing association, the premium
will be higher.
Landlord buy to let policies may come with certain extra conditions,
not seen in a standard home insurance, you may have to confirm that
you are letting the property with a rental agreement in force (such as
a short hold tenancy agreement) and that you will be following all the
rules and regulations relating to renting property, such as having the
gas and electrics checked and making sure that the furniture reaches
certain standards. If you are intending to rent your property as a HMO
(house in multiple occupation) there will be further safety
requirements and your should discuss this with your local authority.
Assetsure is an Appointed Representative
of Intasure, a trading name of Blenheim Park Limited who are
authorised and regulated by the Financial Services Authority.
Assetsure Limited is an appointed representative of Highhouse
Insurance Services Limited who are authorised and regulated by the
Financial Services Authority
Cover for residential landlord property acquired for letting
