If you have rented out your own home, it is essential to inform your insurer about that change. Otherwise, you may find that the insurer may not pay out if you have to make a claim and you may also jeopardise your chances of getting insurance in the future.

So what kinds of things will a buy to let policy typically cover?

The “structural” risks

Each insurer has a slightly different list of risks that they cover, but some may include the following:

• fire;
• flood;
• storm;
• theft;
• damage from objects falling from aircraft;
• contents cover (if applicable).

Depending on the location of your buy to let property, flood risk cover could be limited.

The “financial” risks

Financial risks are less obvious, but can still pose a significant threat to your property as an investment and include loss of rent arising from an insured peril. If the property is seriously damaged due to a covered risk so that your tenant has to move out, you will not be paid any rent until they can occupy the property again, or until you can re-let if appropriate.

Some landlords insurance policies will cover this risk.

You also may need to consider public liability insurance which may help towards costs if a claim is made against you for loss, damage or injury sustained while on your premises.

The premium

No doubt the cost of the buy to let cover is an important factor in taking out insurance for let properties. However, there might be reductions available from the figure first quoted.

For instance, if you are renewing a policy and have not made a claim for some years, ask whether a discount is available to reward your good estate management. You could also look at the excess on the policy as insurance for let properties could be cheaper if you opt for a higher excess.

Often unfairly portrayed by the media, buy to let investors provide a much needed source of privately rented housing. Landlords already shell out for managing agents’ fees and landlord insurance policies, but now the latest batch of red tape potentially adds another layer of expenditure to the cost of having a buy to let property.

The regulations that govern HMOs (Houses of Multiple Occupation) formerly applied only to those flats or houses that accommodate six or more unrelated tenants who share basic amenities. Accordingly, it was typically student accommodation that fell into the class of buildings covered by the legislation. Landlords of HMOs had to comply with enhanced planning and licensing rules to ensure that their properties are situated in appropriate areas and meet strict and health and safety standards.

HMO legislation seeks to balance the needs of landlords, the tenants they house and the residents of local communities. Families and older people have typically been reluctant to see their neighbourhoods develop a high density of HMOs, particularly if students are involved due to the associated anti-social behaviour.

The forthcoming planned extension to this regime means that houses or flats where three or more tenants live and share amenities will be covered by the rules. This means that more landlords will be brought into this regulatory net, including those who let to working, adult flat sharers.

What might the changes mean in practice to landlords?

From a planning perspective, you will have to apply for a change of use if you buy or convert a home that is occupied by a single family into a HMO (occupied by three unrelated sharers). This means that the local planning authority will be able to effectively control the density of HMO properties in their area, based on considerations about parking, anti-social behaviour and the social make up of a neighbourhood.

From a practical perspective, there will no doubt be a hefty fee involved in submitting an application, which could put some investors off entering the HMO sector at all.
Then there is the licensing element of the proposals. The health and safety element is not really controversial among responsible landlords, who do not want to poison or gas their tenants and are prepared to take steps to ensure that they do not do any of those things.

On the other hand, it is the powers of the council to determine the suitability of landlords that is more objectionable to the industry. Whilst it may be a fine intention to ensure that a person is “fit and proper” person to run a HMO, this is difficult to measure and even more difficult to police. Currently not all councils have the power to license HMO landlords, but under the forthcoming regime, more will be able to do this.

Despite these proposals, LandlordZone reports that landlords may be most concerned about a website the government wants to introduce to allow tenants to comment on their landlord’s service and performance. It may be impossible to see how landlords can prevent disgruntled tenants from leaving unsubstantiated and untrue negative “feedback”. However, landlords should take comfort from the fact that this proposal is still in the planning stage, and by no means certain to be brought into force by a government that is about to be distracted by an election.

• Do you really need buy to let building insurance?

You might be wondering whether you actually need to spend money on this, especially if you have other costs like managing agents’ fees to come out of the income you receive from the rent. However, let property insurance is often mortgage lender’s requirement.

But besides any legal obligation you have to insure the property, landlord building insurance could also put your mind at rest that your investment property is protected from damage caused by common risks which you may otherwise have to pay for out of your own pocket.

• What does the policy actually cover?

The structure

Most buy to let landlord insurance typically covers damage to the structure of the building, caused by storm and fire damage. Some covers damage caused by flood too, depending on where the property is located. If your buy to let is a house with a garden, it’s worth checking to see whether garden sheds, greenhouses, walls and fences are included.

The contents

Your buy to let (BTL) insurance can also typically be extended to include landlords contents cover, up to set limits.

Financial issues

Loss of rent caused by an insured risk may sometimes be covered by landlord building insurance, but loss of rent due to unreliable or insolvent tenants may not be. Likewise, legal expenses cover for dealing with such issues varies between providers.

• Are there any discounts available?

In a challenging economic climate, it could be worth asking around to ensure that you get any discounts that are available. No claims bonuses, higher excesses and multi property portfolio policies could be worth exploring as possible ways to bring down the cost of your BTL insurance.

• What about the service?

A fair price does not have to mean poor service. There are affordable landlord building insurance policies available that offer suitable cover backed up with a first class service (such as ourselves!) so never feel that you have to compromise on cover and service in order to get a good deal.

However, once the economic crisis took hold, potential landlords needed to stump up a deposit of around 20-30%, with some BTL mortgage providers asking for even more.

Now, we are seeing a gradual ease off on lending restrictions with some companies slicing interest off their buy to let mortgages too, as well as asking for smaller deposits. For the full story, please click here.

Private rentals on the up
More good news for landlords! The demand for private rentals has increased while owner-occupied properties have decreased. A recent English Housing Survey (a government survey that looks in depth at attitudes and behaviour) showed that owner-occupation is dwindling.

Since its 2003 peak when just over 70% of properties were lived in by their owner, this has now fallen to just under 68% of Britain’s housing stock.

Now, it appears the trend is to rent privately, with 3.1 million people in England doing so during 2008-09, a 50% increase on 2001 figures of 2.1 million.

Other interesting findings from the survey (which covers the period 2008-2009) show that:

• 59% of all private renters in the UK hoping to eventually buy their own home compared to only around a quarter (27%) of social renters;
• Following on from this, 24% of these private renters are expecting to buy within the next two years. This is a 10% decrease from the 2006-2007 figures. However, the amount of private renters hoping to buy in five or more years’ time had risen from 35% to 42% over this period. This may suggest that the economic crisis has meant that renters are waiting longer to buy;
• one-person households were the most common type of renter with 30% of these being private renters;
• 12% in social rented sector were unemployed compared to 5% of private renters and 1% of owner-occupiers;
• 80% of private renters were aged under 55, with only 8% aged 65+.

Some features of letting property insurance are very similar to those of standard home cover.

Buildings and contents insurance

This helps protect you and your bricks and mortar from the financial consequences of things like storm damage, floods, fire and earthquakes. To be adequately covered, it is typically advisable to be as accurate as possible about the full replacement value for your property.

It may be tempting to underestimate this value to help keep premiums down but it may be worth remembering that any claim would pay out only up to this value. If it were not enough to cover actual costs then you would have to find any shortfall yourself.

Even if your property is let as unfurnished, it may still contain some of your belongings like carpets or curtains, kitchen and laundry equipment etc. Items like these may be expensive to repair or replace and landlords contents insurance may be a sensible precaution.

Owners’ liability insurance

If you were to be sued by one of your tenants injured after tripping over a loose floorboard or by a passerby hit by a falling slate from your roof, then without owners’ liability insurance, typically you would be personally responsible for any damages awarded to the injured party.

Property owners’ liability insurance is typically included as standard in a buy to let buildings insurance policy.

Buy to let specifics

There are also other specific considerations that should ideally be taken into account when thinking about letting property insurance. Two of the main additional risks for a letting property are tenants and the fact that your property may be unoccupied for periods of time.

Damage by tenants

Damage by tenants typically falls into one of two categories – accidental and malicious. Not all insurers cover both types of damage in their buy to let buildings and contents insurance. Some do though and that could make repair or replacement of damaged items that bit easier.

Unoccupied property

Just because your property is unoccupied doesn’t mean that you don’t need to bother about insurance. In fact the opposite may typically be true. An unoccupied property is typically more at risk that an occupied one. By definition, an unoccupied property is typically one that that has stood empty for 30 or more days.

Small insignificant problems left unfixed may, over days or weeks, turn into major and expensive, headaches.

Dark windows, overgrown gardens and signs of construction work may also be advertising to thieves and vandals that your property is empty.

Unoccupied letting property insurance can help provide cover in these cases.

What is it and why may you need it? Well, if you’re exclusively an owner-occupier then you probably don’t!

Buy to let property insurance is a form of insurance that will help protect your financial interests if you’re renting out a property or plan to do so. That may be necessary because the risks that come with a property you’re renting out are typically different (and higher in some respects) than with a property that is owner-occupied.

If you’re planning to rent out your property, even if only in part, you may need to:

• change your buildings and contents insurance to buy to let property insurance (sometimes called buy to let landlord insurance);
• think about your public liability insurance protection – this may come included in some forms of landlord insurance and it may be very important if a tenant or their guest is injured as a result of something attributable to the maintenance of your property;
• remember that you may be legally obliged to have an annual gas appliance inspection and safety certification.

It’s also worth keeping in mind that your position as a landlord may also expose you to risks if you ask someone to do work on your property on a casual basis. If they are injured, they could claim against you for compensation and you may not be covered by the public liability component of your landlord insurance.

In such situations, you may be deemed to be liable for the person injured under employment legislation even if they are not your employee and no formal contract exists.

As employers’ liability insurance is not typically included in buy to let house insurance, this may be something worth thinking about further.

Buy to let house insurance and the related risks, issues and laws, may be a little complicated and difficult to get to grips with. Getting advice and guidance may be advisable if you’re to avoid either making some potentially expensive mistakes and ending up with inappropriate cover.

So whether you’re a novice looking to make the transition to property rental or someone with considerable experience, understanding how you can reduce your risks through appropriate buy to let property insurance, may be very important. We’re here to help and please don’t hesitate to call us to see if we can assist.

Yet the latest figures indicate that the latter parts of 2009 show a return to growth in mortgages advanced for BTL acquisitions.

It seems as if a little confidence is returning to the market after 18-24 months of real difficulties. Of course buyer confidence alone isn’t sufficient to drive growth – the banks and other finance sources also have to be prepared to lend and the figures may indicate that this is now happening.

Both the third and fourth quarters of 2009 showed growth in BTL mortgage lending which, coming after seven consecutive quarters of reductions*, has to be good news both for the BTL market and related areas of the economy such as those companies providing let properties insurance.

BTL lending in 2009 was still considerably down on the figures for 2007 and 2008* showing just how much lost ground still needs to be recovered. Even so, in 2009 11.8% of all mortgage lending remained targeted at BTL purchases*.

Deciding whether or not to enter the BTL marketplace is not a decision that you’re likely to make based on a single set of statistics but these figures do appear to show that buying properties with a view to letting them out continues to be something seen by many as an opportunity.

What is difficult to say is what exactly this growth may indicate for 2010. Many economic indicators appear to be looking a little more favourable than they did even 3-4 months ago. Most experts appear to agree that the recovery will continue though some suggest that it will continue to be fragile.

The general election will inevitably play a part in setting the direction for the middle and latter parts of the year. Yet with all the main parties seemingly agreeing that there is a shortage of affordable rental properties and the banks being put under increased pressure to free-up financing, the outlook for BTL in 2010 may be more promising that it has been for a considerable time.

* SOURCE: The council of mortgage lenders press release dated 11 February 2010.

So, why may you need buy to let landlord insurance?

If you own property that you let to tenants, there’s no law of course that insists on you having landlord insurance. Although it might not be compulsory, there are a number of reasons why you are likely to give it very serious consideration:

• If you are looking for a buy to let mortgage to finance your purchase of the property in the first place, the mortgage lender is almost certain to insist on a minimum level of insurance cover for the premises;
• The purchase of a buy to let property involves a hefty investment on your part. The investment could be to provide you a regular income from rent and the prospect of a substantial capital gain when the property is eventually sold. Yet fires, floods or other storm damage, subsidence or vandalism might threaten to seriously damage (or even destroy) the property. Without adequate cover, you might be faced with a repair bill that is impossible to pay;
• Once the tenancy agreement is signed and your tenants are safely installed, your responsibilities as a landlord do not end there. For as long as they remain in your property, you owe your tenants a duty of care to ensure there is nothing that may cause them physical injury, nor loss or damage to their property. If these occur as a result of your negligence in safely maintaining the let property, you might be held liable and face substantial claims in damages or compensation as a result;
• However well you might have checked the references of incoming tenants, there is no fool-proof way of ensuring that all are going to behave in a responsible manner. Malicious damage to the let property or its contents is certainly not unknown and some (but by no means all) landlord insurance policies offer indemnity for the costs resulting from such acts.

So, if you are looking for buy to let landlord insurance, why not take advantage of our service? You can get a landlords building and contents insurance quote online or call one of our friendly and experienced staff on our freephone number if you prefer to talk to us about your landlord insurance needs.

However, there is more to a landlords insurance policy than simply protecting the bricks and mortar. There is also the element of cover needed to protect yourself financially against claims from a third party – such as a tenant – for loss, damage or injury caused to them while in your property. Read on….

Once you’ve bought a suitable buy to let property and started letting it out to tenants, you’ve also taken on the role of landlord. The relationship between landlord and tenant is rather more than just one of you providing the accommodation and the tenant paying for it. You have certain responsibilities towards those tenants, the breach of which might result in you facing substantial claims for liability. To help protect you against the cost of such claims, landlord insurance is available.

So what’s the liability?

You as a landlord have a basic duty of care to ensure that the property you rent out is safe for tenants to inhabit and that the tenants’ possessions come to no harm as a result of any defects in the property itself. What does this mean in practice? As an example, it means, that if the tenant happens to trip over a frayed carpet that has been laid in his or her flat, then the tenant might try and claim for damages against you, the landlord.

The trigger for a claim might even be as apparently minor as a poorly fixed shelf coming away from the wall. But if the tenant’s expensive audio system was on the shelf when it came crashing to the floor, you might be faced with the bill for its replacement.

Damages or compensation for the physical injury of tenants, of course, might prove very expensive and could need to cover a long-term period of recovery. Landlord insurance, therefore, typically indemnifies the buy to let owner against such claims.

Not all one-sided

It’s not all one-sided, though. It’s not always the landlord’s fault. A feature of some buy to let insurance policies, for example, is the ability to arrange cover against malicious damage to the property caused by tenants themselves. Clearly, this might prove a useful safeguard (especially if you are in the business of letting to certain groups of tenants). However, it is worth bearing in mind that not all landlord insurance policies afford such protection so do check the small print.

However, before these are discussed, it is important to highlight that your let property will typically not be covered by using a traditional building and contents home insurance policy but rather with a specific buy to let insurance policy (also known as landlord insurance or building commercial contents insurance) .

This is because your buy to let property is being run as a business venture and will be subject to additional and different risks than those of a traditional owner-occupied property.

Buy to let building insurance

• Similar to your own home insurance, buy to let mortgage lenders typically insist on landlord insurance being in place as a condition of the loan. It protects your own investment in the buy to let property – and of course the mortgage lenders;
• The risks covered are also likely to cover the familiar perils of structural damage to the property as a result of fire, flooding, storm damage or subsidence, but in the case of let property insurance there is typically the recognition that any such damage might result in the property being uninhabitable and rental income lost as a result;

Although the amount of compensation for lost income is likely to vary from insurer to insurer – and may not be offered by all landlord insurance providers – this might prove an invaluable safeguard for landlords who depend on the rental income to help meet the mortgage payments;

• Typically, buy to let home insurance also pays particular attention to the property owner’s liabilities. As a landlord, you have a particular responsibility – and corresponding liability – for injuries or damage to the possessions of tenants and the tenants themselves if you have failed in your duty to make the let property safe;
• As with all forms of insurance, there are any number of different let property insurance policies, each with their own terms and conditions. A useful inclusion in some policies – but by no means all – for example, is cover against the risk of malicious damage (to the building or to the landlord’s contents) by tenants;
• Another variable element is the amount of legal expenses cover, if any, that might be included in the policy. Inclusion of such cover in let property insurance might prove useful in payment of the potentially very expensive legal fees involved in defending, for instance, landlord liability claim