Buy to Let Insurance Information and quotes
Buy to Let Insurance for UK Landlords- buy to let insurance or landlord Insurance, for residential properties, the terms are interchangeable refers to a form of building insurance that you will be required to effect, before your lender will release funds to you for the purchase of your property. 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.
Insurance to Satisfy Your Mortgage Lender – Once you have located your property and have found a suitable mortgage, the lender will require you to affect building insurance prior to releasing the funds to your solicitor. They will want their interest noted on the policy document and they will want confirmation that what ever policy for property 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 conveyancer’s acting on behalf of lenders in residential conveyancing transactions.
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. 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 Buy to let Insurance 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 insured – 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 the rent 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 this will not usually be a valid claim.
When insuring landlord 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. Premiums for HMO’s (houses in multiple occupation) also tend to be more expensive to insure.
Landlord buy to let insurance 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 you should discuss this with your local authority.