The first thing is – you’ll probably need it!

Your responsibilities

Once you start letting out properties, you’ve become a landlord! It’s a fact that you have a business and you may be advised to think of it as such.

Certainly the law, insurance and even taxation authorities will consider you to be a commercial operation and you may wish to start taking steps to protect your interests accordingly.

For a start, your buy to let insurance is going to become important because without it, your property asset may be at risk. You also need to be careful if you’re changing the use of an existing property that you occupy as owner to one of being rented-out, to ensure that you change your buildings and contents policies to landlord insurance versions.

Insurance for let properties

Policies exist to ensure that your buildings, fixtures and contents are protected.

Some of these may also include provisions to offer you financial protection against wilful damage caused by tenants.

They may also offer cover for third party public liability – something that’s pretty important once you start having tenants and their visitors on your property.

These types of policies may offer you various forms of legal costs protection if the legal activities arise as a result of an insured peril but that typically may not include things such as trying to evict tenants or recovering rent arrears etc.

Empty properties

It’s perhaps worth mentioning that you may wish to consider taking out what’s called empty property cover.

It’s not always appreciated that some household and buildings insurance policies become invalid if the property is left unoccupied for more than 30 days.

In fact, this may also apply to owner-occupiers (extended holidays, business trips etc) but as a landlord you may be particularly vulnerable if your property is unoccupied between lettings or is under repair/renovation etc.

The right insurance for the right job

Insurance for let properties is what landlords’ typically require. Don’t try and use owner-occupier home buildings and contents cover. Yes, it’s often a little cheaper but it won’t be valid for your situation! In the event of a claim, typically a traditional home insurance policy won’t pay out if your property is let out – and that won’t be something you’ll want to hear!

It’s not entirely clear what’s causing this when so much else in the economy appears stagnant but experts are discussing a range of factors including:

• a reduction in the overall availability of rental properties caused by the ongoing difficulties in obtaining BTL (buy to let) mortgages;
• more people renting as they hold off buying property waiting to see what the market will do in late 2010 and 2011;
• large numbers of BTL owners withdrawing from the market place during the worst of the 2008/9 recession.

It’s interesting that rental rates are increasing at a time when the conventional property market is showing some signs of slowing down again – even though some people are describing this as a routine seasonal adjustment.

There’s no doubt that the entire property marketplace, including rentals, is still in a state of flux and it’s proving difficult to interpret the, at times, contradictory indicators.

It remains difficult to find consensus amongst the experts as to the true prognosis for the economy going forward or the BTL sector as part of that.

What does seem clear though is that average rental prices, after a great period of uncertainty, have now risen back to close to their peak 2008 levels*.

On the whole, this news seems to be very positive for BTL owners. The fact that there are more people out there looking to rent and that prices are rising, may give many BTL owners confidence after two or more fairly difficult years.

That, in turn, may further boost the market.

If you are a landlord, it’s therefore perhaps worthwhile taking a little extra trouble to ensure that your property stands out from others and that you have everything in order including your insurance for let properties. If that means getting out the paint tins and brushes, then so be it!

Why?

Tenants are still very selective about the property they rent and those little touches and reassurances may make all the difference.

The recent improvements in rental prices are most welcome for BTL owners. In times of uncertainty, making hay while the sun shines is probably the order of the day!

*Source
http://www.landlordzone.co.uk/blog/news/rents-surge-as-supply-diminishes

The reasons are clear. If you are a landlord renting out a property for commercial reward, then it is both a capital asset for you and a business.

If you’re unlucky enough to experience a problem with your property, not only could that asset be at risk but so to could be an important part of your livelihood.

What could go wrong?

Well, there are the usual suspects relating to natural disasters such as fire and flood.

Although that’s perhaps not news in terms of property risks, what does make a rented out property different is that it also carries additional risks that typically don’t apply to owner-occupied property.

That may include things such as:

• intentional damage and vandalism by tenants;
• tenants (or their visitors, families and friends) that are injured on your property as a result of defects;
• problems caused to the property while it is standing empty (eg. between individual rentals or perhaps while undergoing refurbishment).

Of course, an owner-occupied property may also stand empty for a period and that may generate insurance issues but this may be far more prevalent in the case of rental properties.

By virtue of those additional risks, standard owner-occupier home buildings and contents insurance won’t be sufficient and specialist insurance for let properties exists to provide appropriate cover. Trying to use an owner-occupier policy to provide you with cover in a buy to let situation may prove to be disastrous should you need to make a claim.

It may be that you’re not immediately sure whether your letting activities constitute a full commercial rental situation and you may be unsure what is the most suitable landlord insurance solution for you.

How we can help

If that is the case, we would be only too happy to offer help if you have any doubts at all in that respect. Simply give us a call on our freephone number or email us, and we’ll arrange to call you back.

There is no obligation to buy, either!

In summary, to make a success of a property letting business, you’re going to have to take your business seriously – and that includes understanding and managing your risks.

It is there that insurance for let properties may have an important role to play. We’d welcome the opportunity discuss – and, if you so wish, help you find – the most appropriate landlord insurance solution for your needs and your budget.

Why may it be advisable to have such a policy?

Property as a business

Property is often regarded as something you live in. In fact, if you have a buy to let UK business, then property for you is typically more about renting out than living in.

In any business, it typically makes sense to protect your assets as they may relate directly to your ability to earn money. In the case of rental property, if your property is out of action then it’s unlikely to be earning you money.

Even worse in that scenario is if you have an ongoing mortgage on the property to pay at the same time. You’ll have all of your costs but none of your income – not a scenario traditionally seen as being a healthy prospect for any business!

Insurance for let properties

Your property may be at risk from many different sources and the risks may be higher than for a comparable owner-occupied property. It may not be a pleasant thought but the reality is that your tenants are not only a source of income but also significant risk.

In recognition of that fact, typically insurance companies won’t cover rental properties through a standard owner-occupier buildings and contents policy. To ensure that you are fully protected, you may need to take out a specific policy that provides insurance for let properties.

This isn’t just an issue for the landlord that rents out an entire property or a flat in a block as a professional. It may also apply to the owner-occupier who suddenly decides to start renting out a few rooms of their house during the summer.

If you’re gaining rental income from a property then typically any existing owner-occupier insurance has become invalid and you need some form of landlord insurance.

Risks covered

Landlord insurance may need to cover you against a variety of generic risks including:

• buildings, fixtures and fitting;
• contents;
• third party public liability;
• unoccupied property (.g. during repairs/re-decoration).

Some policies may meet some components of your legal expenses in the event of a problem though the levels and coverage varies. For example, some may not support the legal costs of pursuing tenants for rent arrears or evictions etc but will help pay for loss of rental income due to a property being uninhabitable due to an insured risk.

Buy to let landlord insurance

So, as a landlord, you have risks. That may come as no surprise but an appropriate insurance for let properties policy may help you rest a little more easily at night!

Property risks

The fact of the matter is, your property and asset is very much at risk. While it’s true that any property of any type is always at risk, in the case of rental properties the risks are different and in some cases, actually higher.

This typically changes the parameters of a decision regarding building and contents insurance if, for example, you’re looking to buy to let in the UK.

Let’s consider an individual house.

If you’re the owner-occupier then it’s presumably fairly unlikely that you’re going to suddenly decide to damage your own property and contents. You’re presumably equally unlikely to ignore a problem such as a small leak until it suddenly turns into a disaster.

If you trip and fall down your staircase, you probably won’t decide to sue yourself for compensation.

None of these things, however, can be presumed if the house has been rented out and now has tenants in it. Your risks are simply higher.

Insurance for let properties

In a nutshell, that’s why standard owner-occupier home buildings and contents insurance just won’t suffice. Such policies are not applicable to buy to let properties and typically become immediately invalid the moment a property is rented out.

The insurance industry does provide policies for landlord insurance. These are typically a little more expensive than those for owner-occupied properties but the difference is explained by the additional risks carried by the insurance providers.

Exclusions

Insurance for let properties typically provides cover for buildings and contents and public liability. Some may cover malicious damage and theft arising from tenant occupation – but not all, so always check what the cover entails. It may also be worthwhile checking to see that they provide cover for empty properties (eg. vacant property insurance for in between rentals etc).

Typically they won’t cover employers’ liability (if you’re employing staff), nor some forms of legal fees or claims arising from lost rental income due to absconding tenants.

Taking the time to check

Your property is a major investment. Given the amount of money you may have spent on it, taking the time to think about the insurance you require to protect it would appear to make sense.

There are specialist providers of insurance for let properties offering a range of products and policies to suit most requirements. Finding out more might be a smart move.

What sort of problem?

It could be just about anything including, but not limited, to:

• floods, leaks and other water damage;
• burglary and theft;
• vandalism whether through tenants or others;
• fire; and so on.

Why do I need insurance for let properties?

Insurance companies typically regard let property as being at higher risk in many categories than a roughly comparable owner-occupied property.

That arises principally from the fact that you have tenants in your property rather than the owners and that your property may well stand empty more frequently in-between lets.

What this also means is that standard owner-occupier buildings and contents insurance won’t cover a let property.

If you’re buying to let, then you’ll also need buy to let insurance immediately. If you’re changing use from a property that’s owner-occupied to rented out, then your existing insurance will probably immediately become invalid. You will need a policy that covers rented properties.

It’s worth keeping in mind that insurance companies have methods for discovering the true occupancy position of a property – particularly in the event of a claim. Trying to use owner-occupier cover to save a relatively modest amount of money might not be a smart strategy.

What does insurance for a buy to let property give me?

It’s always advisable to check cover carefully on a policy-by-policy basis to ensure that it will be suitable. Typically this form of insurance will provide:

• buildings and contents cover for a rented out property etc;
• wilful damage by tenants;
• burglary and vandalism;
• public liability insurance.

Employee liability cover is typically not included in a standard policy of this type.

Is buy to let UK insurance obligatory?

Generally no, however, interpretations of this may vary and if in doubt it’s always advisable to seek qualified legal advice. In some situations some forms of insurance may be mandatory if your property and tenants come under accommodation and guest laws rather than tenants.

On the whole, insurance for let properties is usually highly advisable.

Insurance policies vary

This may appear to be being guilty of stating the blindingly obvious but some landlords may not appreciate just how specialised the insurance for their buy to let property needs to be.

Standard homeowner-occupied building content insurance UK policies will typically not be valid for a property that it let out either in part or total. That is not something you’ll want to discover only once you try and make a claim.

The problem is that as well as presenting you with income and opportunities, your property also brings with it unique risks due to the fact it is being rented out – and there are special insurance for let properties policies available to cover those risks.

How can the risks be different?

Your property may not be at any greater risk of, say, having its roof blown off in a storm than any other. However, it is different in two important respects:

• you have tenants and tenants bring risks of things such as claims against you for injuries sustained on your property as well as the possibilities of theft, vandalism and property damage through a lack of care and attention etc;
• it may stand empty for periods while you’re waiting for new tenants or it is under redecoration and renovation etc – this means it is at far higher risk of vandalism, burglary and so on.

As these types of risk do not exist for a conventional owner-occupied property, special insurance is required.

Getting appropriate cover – fast

Your business is all about being a landlord and not an expert in insurance. Sorting through the various landlords insurance policies, prices and conditions may often be time consuming and confusing.

That’s where we can help by using our proven knowledge of the market to help you find the solution that is appropriate for your situation, without confusing terminology or any obligation for you to buy.

Insurance for let properties is important and it may pay to avoid taking chances with it as a result of guesswork or insufficient knowledge.