The landlord insurance jargon buster
Thursday 11 May 2017
Someone leaves the straighteners on and they burn through the carpet. Next door’s kids kick a football through the living room window. Red wine is spilt over the sofa. If it’s an unintentional one-off incident that harms your property or its contents, it counts as accidental damage.
Accidental damage cover can come as standard on some landlord insurance policies, but it usually depends on the type of area your property is in, and the type of tenant occupying it. Always check to make sure it’s on your policy, and add it on if you need it.
These are extra levels of cover you can take out on top of your basic buildings and/or contents insurance. Examples include Home emergency cover, or Key protection. They may not always be provided by the main insurer, who might be working with other insurance companies to provide you with the add-ons through a seamless service.
There’s been a leak from the bathroom straight into the kitchen, and your tenants can’t wash or cook until it’s all sorted out. If you have to make a claim on your buildings insurance and your tenants can’t live in the property when it’s being repaired, they’ll need Alternative accommodation. With Alternative accommodation cover, your insurance provider could cover these costs.
Assured shorthold tenancy
This is most common form of tenancy agreement (it’s sometimes referred to as an AST).
It basically means that the tenant has a period – often six months or a year – in which their stay in the property is secured. Rent cannot be increased during that period. Beyond that you can either establish a new fixed term period or continue on a rolling basis.
Buildings insurance protects your property against damage, for instance if there’s a fire, a flood, damage from a storm, or something a bit less apocalyptic – like a simple roof tile blown off in a storm or a leaky bath. If you need to rebuild part or all of your property, you need to make sure you’ve got the right level of cover to do so – without having to pay out from your own pocket - or pay over the odds for your policy.
Fixtures and fittings - like kitchens, bathrooms and carpets - are usually all covered under your buildings insurance, but you’ll need to check your own policy for full details of what is and isn’t covered.
Buildings sum insured
Buildings sum insured is the amount of money it would cost you to rebuild your property if it was destroyed or badly damaged - including materials, labour, site clearance, and architect fees. It doesn’t have anything to do with what you paid for your property, or how much money you could sell it for.
Always recheck your Buildings sum insured figure every year, especially if you’ve had work done - for instance a new bathroom or kitchen - so you can make sure it’s right and you’re properly covered. If you’ve under-estimated you’ll end up out of pocket, and could even affect the amount that is paid if you make a claim.
An independent intermediary who sells policies from a range of different insurance companies.
Refers to properties people purchase to rent out to tenants rather than live in themselves. You get special buy-to-let mortgages for this purpose, but you’ll need a good credit record, a decent deposit, proof of a decent income - and you’ll need to be prepared for higher fees and interest rates. You’ll also probably struggle to find a buy-to-let mortgage if you don’t already have a property (with a mortgage or not).
Ending an insurance policy with your insurance provider before it is actually due to end. This may incur a cancellation fee - possibly even a percentage of your premium.
An application to your insurance provider to compensate you for damage or loss that’s covered by your insurance policy. Most insurance companies make this pretty easy - just go online or get on the phone and pick the ‘Make a claim’ option.
The more you use your insurance, the more it costs. When giving you a quote, insurance providers will always look at how many claims have been made and what has been claimed for in the past, before giving you a quote for insurance. It helps them work out the risk they’re taking on, and how expensive it’s going to be to cover your property.
Cooling off period
After purchasing a policy, the person buying it usually has a set period of time – or ‘cooling off’ period - during which they can change their minds and cancel the policy without incurring any charges.
Generally, if you turned your property upside down and shook it, everything that would fall out counts as the contents (so the sofa, but not the kitchen units). And if this or some other disaster should occur, you need insurance to cover the cost of replacing things like the property’s furniture and appliances.
As a landlord you’ll need to cover anything that belongs to you in the property - and your tenants will need their own contents insurance to cover their own belongings.
Contents sum insured
A bit like Buildings sum insured, this is the full figure you need to calculate for how much it would cost you to replace all of the contents of your property. If you’re renting out a furnished or part furnished property it’s particularly important to get this right, and to keep the receipts for things like curtains and sofas so you know the full value of your contents in the event of a claim.
A specific variation on your policy. Any endorsements will appear in your policy documents – either on your policy schedule or on a letter from your insurance.
Emergency services cover
If your tenant is ill and the paramedics have to break down the door to get to them – you might not be covered by your standard insurance. This doesn’t count as accidental or malicious damage, so if it’s a likely scenario for your property it’s probably worth thinking about emergency services cover as part of your policy.
Escape of water or oil
Insurance-speak for a leak.
Your excess is the bit you contribute before your insurance policy kicks in and takes over. Compulsory excess is set by your insurance provider, but voluntary excess is where you can choose what level of excess you want to pay. It can make a big difference to the overall cost of your policy.
No one really likes having to pay their excess, because whatever level it’s set at, it’s still a chunk of money out of your own pocket! Excess protection is an extra bit of insurance you can take out to protect that excess - and get it back. So if something happens and you make a claim, when everything is fixed and the claim all settled, you can put in another claim and get your excess reimbursed.
These are the things your insurance provider won’t pay for - so they’re ‘excluded’ from your policy. It’s important to read your terms and conditions carefully so you know what you’re covered for and what you’re not. Look out for exclusions which might invalidate various parts of your insurance policy – for instance if your property is left unoccupied for a long period of time. It will depend on the terms and conditions of your particular insurance policy.
Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) is an independent body which regulates the conduct of firms in the financial services industry - particularly those providing services to consumers. It’s their job to regulate the conduct of banks and insurance companies to make sure financial markets are honest, fair and effective - and customers get a fair deal www.fca.org.uk
Good state of repair
If your property is not considered to be in a ‘good state of repair’, it may invalidate your insurance policy. Examples of this could be if it isn’t finished, has dry rot, rot, damp, infestations, a leaky roof or faulty wiring.
The movement of the ground underneath a property, which could cause damage to the building itself. There are three types of ground movement - see subsidence, heave and landslip.
Heave is a form of upwards ground movement - and generally happens to properties built on clay soil. If there’s a lot of rain or a flood, the ground can swell and you end up with bulges under walls or floors, which can cause cracks and other damage.
Home emergency cover
If there’s a domestic emergency that needs sorting pronto, Home emergency cover could pay for the call out, parts and emergency repairs. Cover tends to come in different levels - from simple boiler breakdown to full home emergency cover for leaks, electrics, blocked drains, or wasps in the loft. You pick which level you need for your properties and tenants.
Be warned that Home emergency cover is for emergencies only - so it’s got to be something that’s going to cause significant damage to your property or distress to your tenants. (A broken boiler in the middle of summer wouldn’t count, for instance). You’re also only covered for a temporary fix (unless a permanent fix will cost the same or less), so a full repair or any other damage might have to wait a bit longer and come under your buildings or contents insurance instead.
A House of multiple occupation, or HMO, is a property in which is rented by three or more tenants who aren’t part of the same household (or family), but share a toilet, bathroom or kitchen with other tenants.
Homes are classed as a ‘large HMO’ if they are at least three stories high, contain at least five tenants from more than one household, and have shared facilities.
Large HMOs need a licence from the local authority – and failure to do this could result in a large fine.
A loss or damage that happens as a result of other loss or damage. Your insurer might not pay out for indirect losses - so be mindful of this when checking your policy. While a specific event might be covered, things happening as a result of that event might not. So you might get damage repaired, but if it caused your tenant to move out you wouldn’t automatically get compensation for loss of rent unless you took out specific insurance covering you for that eventuality. (See Loss of rent).
A regular and official visit to a property to check everything is being maintained, and to troubleshoot any potential issues (like a leaky tap or noisy washing machine). Many insurance policies require regular inspections as part of the terms and conditions of cover.
The cost of your insurance policy.
Insurance premium tax
The tax you have to pay on your insurance premium, which will be part of your premium cost. This is tax is expected to go up in the coming months, so it’s worth keeping an eye out for changes. Insurance premium tax is set by (and paid to) the government, and insurance companies will pass this on to their customers.
Infestations count as anything from woodworm to mice or wasps.
Your insurance might be invalidated - no longer valid - if you don’t meet the terms and conditions of your policy. For instance if your property is unoccupied for a long time, your insurance may no longer cover you for any damage that occurs on the property. It’s always worth checking your policy carefully so you know exactly what you’re insured for, under what circumstances.
Key protection means you’re covered for the repair or replacement of the locks and keys used to secure your rental property. If keys are lost, stolen or damaged, if they’re locked inside and you need to get back into your property, having key protection means your insurance provider will pay towards a a locksmith to get it sorted.
Another type of ground movement, specifically describing the downward or horizontal movement of the ground - caused by an earthquake, a landslide or even a mining collapses.
Your claim limit is the maximum amount that your insurer will pay out on a particular policy.
A ‘loss’ in insurance terms is any damage sustained to whatever is insured, as a consequence of any of the list of accidents or misfortunes it has been insured against. A loss can be total, or partial.
A loss adjuster is used by an insurance provider to carry out detailed investigations of complex losses. It’s their job to negotiate a settlement which is within the terms of the policy and fair to the individual.
Loss of rent cover
If something serious happens to your property – like a fire or a flood - and tenants can’t live there anymore, you’re going to lose a lot of rent while building work and repairs take place.
Loss of rent cover means that if your property can’t be occupied, you don’t have to be completely out of pocket.
It’s usually related to Alternative accommodation cover, and kicks in once any tenants have found a new place to live. You can pick what level of cover you’d like, and pay more to get your rent covered for a longer period or up to a higher amount - usually a set percentage of your Buildings sum insured figure.
Landlord legal expenses covers certain legal costs that relate to issues with your rental property. If a tenant breaches their contract, if you need to chase rent or pursue an eviction, if you’re facing civil or criminal investigations related to your property investments - the one thing you don’t want to have to worry about is legal fees. Check your policy to see exactly what legal issues you’re covered for.
If you own a rental property and someone gets hurt in or around it - or their property gets damaged in or around it - you could be liable to pay them compensation and any resulting legal fees if you are negligent. Say a postman delivers a letter to your property on a windy day, and gets hit by a falling roof tile, and decides to take you to court. Or the carpet in the hall is loose and causes a tenant to trip, and they sue for damages. Legal liability basically means if someone decides to sue you, then your legal costs should be covered.
Sometimes bad stuff happens to good properties, and sometimes it’s deliberate. Pipework ripped out of houses for the copper, leaks and fires started on purpose, and buildings gutted to make way for cannabis farms.
If it’s your tenants who’ve done the damage, you may not be covered by the buildings, contents or accidental damage sections of your insurance policy. That’s where malicious damage cover comes in - and it means you may be able to make a claim even if it’s your tenants who have damaged your property.
The official term for a change made to your insurance policy.
If you withhold information or mispresent information relevant to your policy, you haven’t given them the information they need to accurately assess the risk you/your property poses - and that could invalidate your insurance policy. While the onus is on the insurer to ask you all the right questions before they price up your policy, it’s your responsibility to answer them fully and to the best of your ability. See also Non-disclosure.
If you haven’t taken care of your property, your insurer might not be able to pay out on your policy. Failure to take reasonable and regular measures to maintain your property could invalidate your insurance policy – and could include failure to inspect. Many insurance companies will require regular inspection as part of the terms of your policy.
If your insurer promises to replace items on a new-for-old basis, it means that once a claim has been accepted, they’ll replace them with the latest materials and to the latest standards, without quibbling about depreciation or wear and tear.
Not a term much used in insurance these days - see Misrepresentation.
Insurance that isn’t your everyday, run-of-the-mill stuff. So if you’ve got an unusual property - say a listed building or a building with a flat roof - you probably need something a bit more specific, and tailored to your property’s particular needs. Likewise if you’ve been made bankrupt or have a poor credit history, you might have to go through some special or extra steps to secure your insurance.
Occupancy of your property by a tenant - someone living in your property with your permission.
A person appointed to look into complaints. Ombudsmen are independent, free of charge and impartial – so they don’t take sides with either the person who is complaining or the provider being complained about.
Say your insurance claim hasn’t been successful, and you’ve been through the insurer’s own complaints policy. If you’re still unhappy with the decision, you may be able to ask the Financial Services Ombudsman to investigate - www.financial-ombudsman.org.uk.
A specific risk or cause of loss covered by an insurance policy - like a fire, flood or theft.
Period of insurance/cover
Most landlord insurance policies are taken out for a year, and this is the period that you’re covered for.
A contract of insurance. You will receive policy documents or a ‘schedule’ detailing your policy terms and conditions. (See Schedule and Terms and conditions).
If you’ve got more than one rental property, you’ve got the makings of a property ‘portfolio’. Many insurance companies will offer you a portfolio quote - so you can get all of your properties covered by a single insurance policy. It could save you time, hassle, and money.
A quote is an estimated cost of a service – for this case insurance. You provide all of your details and all of your insurance requirements, and get a ‘quote’ for how much an insurance provider thinks it will all cost. It’s a great idea to get several quotes to make sure you’re getting value for money, but be sure to compare like for like. The cheapest option may not be covering you for everything you need.
When a policy falls outside of the normal terms and conditions of insurance, it might be referred to our underwriters. It’s their job to decide how to assess the risk. For instance, a property with a flat roof might be passed on to the underwriters, who’d ask how much of the roof is flat, when it was last repaired, what it was made of. They’d use that information to assess the risk more accurately. That might have an impact on the price of your policy, and they might impose additional terms and conditions too - for instance requiring the roof to be inspected every 2 years, or replaced every 10 years. See also Non-standard, and Underwriter.
Just prior to the end of your period of insurance, your insurance provider will get in touch to inform you your policy is about to end, and give you the chance to continue with the same policy for another year. It’s always worth taking the time to re-check what you’re covered for, and making sure you’re getting the best possible price.
Money that is owed and should have been paid earlier. If your tenant’s rent is in arrears, it means they haven’t paid up, and you may need to contact your insurer to start the process of claiming it back. Some level of legal expense is usually part of standard buildings and contents insurance policies.
What if your tenant stops paying their rent? If it takes some time to sort out the situation and you’re relying on that income – it’s going to have a big impact. On average an eviction process takes four months. Taking out rent guarantee as part of your insurance policy means your insurance provider could plug the gap until the tenants are paying up, or until they’re evicted – allowing you to look for new tenants. If you need the rental income to pay the mortgage, then this cover could be invaluable.
The document issued by your insurer which details your name and address, the period of insurance, the cover you have and the terms and conditions of your policy - including any endorsements. (See Endorsement).
Subsidence is a form of ground movement - specifically the downward movement of the site on which a property stands, where the ground beneath the foundations is unstable. Subsidence results in cracking and hence property damage. It can be groundwater related, weather related, or caused by mining or natural geological movement.
It is not related to the weight of the building, or poor building practices. Where there’s subsidence, it usually means that different parts of the property are moving at different rates.
The written agreement made between you and your tenant - see Assured shorthold tenancy.
It’s important to know as much about your tenants as possible, so you know your property is in safe hands. References should include photographic ID, proof of income, previous addresses, previous landlord references and any relevant visa or travel information. Referencing services are available from many different organisations, and start at around £15-£20. Many insurance policies require references for legal or rent guarantee covers, or for your tenants to have been in residence for at least 90 days without incident.
When something happens that completely destroys your property. In the event of a successful total loss claim, your insurance provider costs would be up to the full sum of your insurance policy.
Trace and access
If you’ve got a leak you can’t easily get to (eg. under the floorboards) then trace and access means getting someone in to investigate and find your problem. Some insurance policies will cover any damage that’s done during trace and access (like a hole made in a wall getting to a pipe), as well as fixing the main issue. Check your policy documents for the exact wording!
If you’re under-insured it means the sum insured on your policy is not going to be enough to cover the worst case scenario or maximum damage to your property. That means you may end up out of pocket, so it’s absolutely key to make sure your Buildings sum insured is correct.
An underwriter is an organisation or individual employed by an insurer to decide how risky something is, and then to calculate the premium to charge for it as a result. They consider the risk proposed, whether they want to take it on, and under what terms and conditions they can do so. See also Referral/referred and Terms and conditions.
Not fit for people to live in - eg. dirty to the point of being hazardous to health, no running water or no heating. Also refer to Good state of repair.
Things that can’t be covered, or aren’t covered, by your insurance policy. These will be detailed in your terms and conditions.
A property is deemed as unoccupied when it is not lived in by a tenant (usually after a set amount of time has passed). Unoccupied houses are more likely to suffer damage - whether that’s vandalism, unnoticed leaks, or squatters.
Unoccupied properties cost a lot more to insure, and a lengthy period of time without tenants could affect your insurance cover.
Various small animals or insects, such as rats, cockroaches, mice, wasps or hornets, that are destructive, annoying or hazardous to health. See Infestations.
When your insurance company voids your policy it means that they are treating it as though it never existed and no cover was in force. Policies are normally voided if an insurance company thinks that information you gave them when you took out the policy was incorrect, or if something has changed that you didn’t tell them about, or if you haven’t kept to the policy terms and conditions (although if you’re lucky this may just mean cover is cancelled form a particular point in time rather than altogether voided). See also Invalidated.
Some policies come into effect immediately, but for others, or for add-ons, there might be a waiting period. This is the time between the purchase of the policy, and when it actually kicks in. For example, Home emergency cover might have a 14 day waiting period. It means the insurance provider does not take on people taking out policies and putting in immediate claims. (So you can’t discover your boiler is broken, and then take out Home emergency cover and expect it to pay out the next day).
Wear and tear
Your landlord insurance probably won’t cover wear and tear - the general day-to-day and low-level damage caused by continuous use (which can become serious if left untreated). If you need to make a claim for accidental or malicious damage, you might be asked to show the previous condition of whatever is damaged – which is where inventories and inspections come into their own for landlords.
The year your property was built.