What to consider protecting against when you buy landlord insurance
Thursday 18 May 2017
For most landlords, a buy-to-let investment is their most valuable asset apart from their own home.
Many rely on it for income each month, or are counting on its appreciating value as a crucial part of their retirement plan.
It figures that protecting that income should be high on the list of landlords’ priorities.
Yet many have the wrong type of policy and don’t invest the time to make sure they have the right type of cover.
It’s not always easy to understand what you need and not all policies are created equal. With that in mind, here are This is Money's top tips when taking out insurance.
Check what is and what isn't covered
You need a specialist landlord insurance policy for your buildings and contents cover. Standard home insurance is not suitable for buy-to-let properties.
When it comes to choosing a provider, ask them about various terms of their policy such as what is and isn’t covered and what their excess levels are.
A huge proportion of landlord insurance claims are made for water damage caused by a burst pipe or leaking appliance, something the industry refers to as Escape of Water. Some insurance providers have separate and much higher excesses on escape of water claims than your standard excess, ranging from around £300 to as much as £1,000. So be sure to check this out.
Evicting tenants, unpaid rent and malicious damage
Then there are four main additional covers to consider.The first of these is landlord legal expenses, which among other things will fund evicting a tenant if they don’t pay the rent or breach the terms of their tenancy agreement.
Eviction numbers have risen over the past few years, and the costs of eviction for a landlord can run into thousands, making this effective cover especially for the more risk adverse landlords.
An addition to legal expenses cover is rent guarantee, which will protect and pay your rental income if the tenant fails to pay the rent.
Home emergency will provide an emergency service and helpline for tenants to call in several scenarios such as a heating breakdown, securing a property following a break-in or pest infestations. With around two thirds of landlords managing their own property, this cover can prevent the dreaded 3am call from a tenant. However, be aware that there may be conditions attached to parts of this cover, such as arranging for your boiler to be serviced each year.
The final additional cover is for malicious damage or theft by tenants. This pays out if your tenant deliberately damages your property or embarks in illegal activity on the premises.
When considering this option, ask if your insurer what level of cover they offer (i.e. £5,000, £10,000 etc) and if they cover your type of tenant as some will only offer it for professional working tenants, for example, but not students or housing benefit recipients.
Check what other customers have said about your insurer
When you buy the policy or, more importantly, if you are unfortunate enough to have to claim, you need to know that the company you have bought your policy from will be there when you need them.
Look for a company with good feedback on independent review websites such as Feefo and Trust Pilot and those with a 24-hour claims service.
You get what you pay for
Don’t pay over the odds, but be careful of paying the cheapest price you can possibly find as the policy’s exclusions and service might end up costing you money in the long run.
Use the BCIS calculator to accurately estimate the rebuild value of your property (known as your building sum insured).
This is important to ensure you aren’t over-insured and paying a higher than necessary premium or worse, under-insured and find yourself with a hefty bill in the event of a substantial claim. It is important to note that your property’s purchase price and value is not the same as your building sum insured.
Another way to reduce your premium is to consider increasing your voluntary excess payments. If you’re the sort of landlord who has a good network of handymen or fix smaller things yourself, you can achieve a decent discount from increasing your excess to an amount you feel comfortable with.
Consolidate your cover
Landlords with more than one buy-to-let property can also reduce their premiums by putting everything onto one policy.
As well as giving you one renewal date and one port of call, most insurance providers will also give you a discount.
There is a legal requirement for insurers to disclose what you paid last year when they send your renewal notice, which will highlight any big and unexplained jumps in premium from year-to-year.
This is designed to encourage you to shop around, so make the most of the prompt to be sure you’re getting the best price and cover.
The Financial Conduct Authority’s new requirement for insurers to disclose what you paid last year when they send your renewal notice will highlight any big and unexplained jumps in premium from year-to- year.
The regulator’s new transparency requirements will encourage customers to shop around, so make the most of the prompt to be sure you’re getting the best price and cover.
Andrew Wynne-Jones, underwriting manager of Simple Landlords Insurance, says: 'We have a policy not to ramp up premiums at renewals. We want customers to be with us for a long time and believe that keeping things simple and transparent is the best way to reward loyalty.'
When it comes to claiming
Insurance is ultimately a product you hope you will never need to use. In the moment of truth, ask if the promise to make things right will be dealt with by the same company who has sold your policy, or if it will be outsourced to a third party.
Also take time to consider up front what risks your property might be exposed to - for instance is it in a high crime area or near a watercourse and make sure you tailor your policy/cover to ensure those risks are protected.
This will prevent any nasty surprises or exclusions when you need to claim.
Keep it simple
It shouldn’t be difficult to set a policy up online or over the phone, and to make changes to your policy whenever you need to.
Make sure you are dealing with specialists as they won’t ask questions that are not relevant to your cover.
There are a lot of companies out there that will sell you a policy but making sure buy-to-let is their area of expertise means you won’t be shoehorned into buying a policy not really designed for your risk.
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