The emerging landlord

How are landlords insuring their investments?

We wanted to understand better how landlords are mitigating their risk in new market conditions, while maximising their profits.

We found room for greater efficiency, with up to a third of landlords having insurance that doesn’t fully meet their needs.

One in four have a mix of standard homeowner’s buildings and contents rather than specialist landlord policies - but many standard policies don't cover the unique risks that come with being a landlord.

How do you insure your rental property?

How do you insure your rental property?

Expert commentary...

Tom Cooper

Tom Cooper

“Out of all the stats in this report, the fact that so many landlords don’t even have landlords insurance is the one that - perhaps unsurprisingly - concerns me the most! 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. Any property is going to be the biggest investment you make - and not protecting that properly could cost you dearly.”

3% of the landlords to whom we spoke, and 6% of those who had attempted to claim, said their insurance had not covered them.

7% either did not know the type of insurance they had purchased, or had no insurance at all. However, of this group, 92% were sole property landlords - in keeping with the profile of the amateur rather than professional landlord.

39% of this group also admitted they were not consistently keeping their insurer informed of changes to their property or tenant profile - essential in retaining adequate cover.

What do you look for when choosing an insurer?

What do you look for when choosing an insurer?

Like consumers in general, we found that price, not quality of cover, tends to drive the purchasing habits of landlords, both large and small. 86% of landlords said price was very important to their decision. Positive reviews from peers were considered less important, at 66%.

There is a slight difference, again, between single property and multi-property landlords, with a larger group of one man bands considering price extremely important (43%) than quality of cover (38%). For larger portfolio owners, the positions reverse, reflecting the additional risk and complexity of owning several properties.

Similarly, landlords do not appear to be switching their insurance, which means missing out on potential savings. In fact, more than half (57%) of landlords we spoke to said they found a lower rate when they switch. We found that saving money was the main reason for switching (77%) - six times a greater motivator than finding a better policy (13%). The median saving for landlords is £35; the average £70.

How often do landlords switch insurance providers?

How often do landlords switch insurance providers?

Despite the opportunities to boost the coffers, only 13% of landlords chose to switch every year. Over half (58%) renew automatically.

Landlords tend to stop switching as their portfolios grow. On average, single property landlords have been with their current insurer for a little over three years (3.22). This jumps by over a year to 4.43 years for landlords who own between 2 and 4 properties and over five years for landlords with ten or more properties.

Why don’t landlords switch? Hassle (30%) was flagged as big a reason as loyalty to the current provider (31%).

Two thirds of landlords with more than five properties say they insure all their properties under one policy, because they believe it’s both cheaper (79%) and faster (79%).

Expert commentary...

Tom Cooper

Tom Cooper

"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 best deal, 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%.

When it comes to landlords insurance smaller isn’t necessarily better! You need to look for an insurer you can trust, great reviews, independent quality marks, and policies you can tailor so you’re not paying over the odds – and you’re not compromising on cover either."

Carl Agar

Carl Agar

"A changing environment creates risks, and managing that risk is more important now than ever. Always factor your insurance in up front as part of running your numbers. I’ve seen people take on ‘unique’ properties before, who have then found that the insurance premium has wiped out most of their profit - I’ve done it myself! Anything out of the ordinary, in terms of size, number of bedrooms/bathrooms, age, building materials, etc - could tip your insurer over their risk ‘edge’. Look out for the red flags, and don’t find that out AFTER you’ve invested."

Bindar Dosanjh

Bindar Dosanjh

"There are still opportunities out there for landlords prepared to diversify. But if you’re taking on more risk, you also need to protect yourself. Every penny counts now, but covering your assets - and your back - is still essential. If you don’t have the right insurance, you can kiss your investment goodbye. Finding the right insurer, the right products, understanding and tailoring your policy is crucial."

Getting the right cover starts with getting the right quote. When we asked landlords how they calculated the rebuild value of the property for their insurance quote, we received a wide range of responses.

We found that 37% of landlords could be paying too much for their insurance - or risk being underinsured - by using the wrong valuation of their building, based on either a self estimate or the purchase price of the property. More landlords, in fact, opt for the estimation route (19%) than using a surveyor (18%).

Landlords with at least two properties were around three times more likely to opt for a professional evaluation than those with just one. They were also more likely to go down the self-estimation route, due to their higher level of confidence and experience.

When you took out your insurance policy, how did you work out the rebuild value (building sum insured) of your rental property/properties?

When you took out your insurance policy, how did you work out the rebuild value (building sum insured) of your rental property/properties?

Expert commentary...

Tom Cooper

Tom Cooper

"It’s incredibly important to make sure your Building Sum Insured figure is accurate - particularly if you’ve had renovation or building work done. If you’re found to be underinsured, your insurance company will consider that you’ve only been paying a percentage of your premium, and you’ll only get the same percentage of any claim."

We also looked at inspection as a key area of risk mitigation. Regular inspections can prevent small issues becoming larger and more expensive problems - but many landlords simply aren’t going into their properties.

A quarter (25%) of the landlords we spoke to had not inspected their property in the past year. At the extreme end of the scale, 6% had not carried out an inspection in over three years. There is a particular inspection gap left by landlords with between two and four properties - we found 72% hadn’t inspected their properties in the previous six months.

When was the last time you or your agent carried out an inspection of the overall condition of your rental property/properties?

When was the last time you or your agent carried out an inspection of the overall condition of your rental property/properties?

Expert commentary...

Carl Agar

Carl Agar

"Your inspection regime will be driven largely by the type of property and type of tenant. In an HMO, for instance, I’d recommend you begin by inspecting the communal areas every month, and the rooms every 3 months if running on ASTs, and then move to every 6 months if things are going well. I’d also highly recommend a weekly cleaning service, so you’ve got an ongoing presence in the property and some control about how well it’s being kept.

Remember that your tenants have the right to ‘peaceful enjoyment of their property’ - but that if there are any issues you’ve got the right to go in more often - with 24 hours written notice."

Tom Cooper

Tom Cooper

"Check your insurance policy and your buy to let mortgage to make sure inspections aren’t actually a condition of your cover/contract. When you do inspect, make sure you keep a record - including pictures - and get your report signed and dated by your tenant."

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Simple Landlords Insurance is a business name of Millennium Insurance Brokers Limited. Millennium Insurance Brokers Limited are authorised and regulated by the Financial Conduct Authority. Our FCA registered number is 308310. Millennium Insurance Brokers Limited is registered in England and Wales Company No. 2103848. Registered Office: Quay Point, Lakeside Boulevard, Doncaster, DN4 5PL. *More than 10% of new and existing customers paid less than £112.69 for their cover between September 18 - November 18 and more than 50% paid less than £142.50 over the same period.