1 in 4 landlords don’t have the right insurance
As a landlord, the properties in your portfolio are probably some of the biggest investments you’re ever going to make – but it turns out a quarter of landlords are putting those investments at risk, by purchasing the wrong type of insurance for their buildings and contents.
As part of our Emerging Landlord report, we asked more than 500 landlords how they were insuring for success in an increasingly uncertain and changing market.
But it turns out that it’s insurance that’s one of the things dropping off landlords’ To Do lists as margins tighten.
“That’s a problem,” says Tom Cooper, Director of Underwriting here at Simple, “because not having any insurance – or having the wrong insurance – could mean that any damage to your property has to come out of your own pocket.”
Smaller landlords often with single properties were the most likely to have the wrong type of insurance - with 28% buying a standard home insurance policy.
7% of landlords admitted to not knowing if they had insurance or not, and a further 25% had actually purchased BOTH specialist landlord and standard homeowners cover – doubling up on costs.
Tom continues: “A home insurance policy will not cover you for loss of rent, it will not cover you for legal fees in the event you need to pursue an eviction, and it may altogether void any claims you have to make.”
Simple’s Abi Stevens told landlords at last month’s Property Investor Show that it’s not just smaller landlords making mistakes. She added: “Even bigger, professional landlords are not always getting the right level of insurance for their different properties – or have the same insurance for all properties.
“Insurance really does matter. A single claim for water damage – one of the top claims we see here at Simple - could cost you more this year than Section 24, but is way down the list of landlords’ concerns.
“A burst pipe costs an average of £4,500 to fix – and 28 days when you tenants might not be able to live in your property. It doesn’t matter how big a landlord you are, you’ll feel that on your bottom line, and you want to know your insurance company will cover those costs.”
When it comes to insurance, most landlords are also just auto-renewing (58%), and most are also just buying on price (86%) - without looking at quality markers like Defaqto ratings, or customer reviews using services like Feefo.
Abi adds: “You wouldn’t go out to a restaurant or book a holiday without checking trip advisor, but you would risk hundreds of thousands of pounds worth of property by not looking at the nuances of your cover.
“Obviously, we’re an insurance company. We would say that you need insurance! But you also know your property your tenants and your risk best – and you can pick and choose the right cover at the right price balance to protect yourself.”
“High quality insurance, at the right level for your personal risk can help free landlords to diversify their strategies and think differently about how, when and where they invest,” agrees Tom.
“Whatever the reason, landlords - especially those with growing portfolios - are put off by the complication of moving their insurance. But it’s always worth shopping around to get the right cover at the best price, and the burden of administration is usually taken on by the insurer.
“Even if you’re not swapping, you should never accept an unjustified hike in price. Unless something has changed significantly at your property or you’ve had a major claim, year on year you shouldn’t be seeing your premium go up by more than about 5%.”
Take a look at how to insure for success in the Emerging landlord report here.
View our Simple jargon buster and our top tips for getting the right insurance here.