LANDLORDS – IS YOUR PROPERTY CORRECTLY INSURED?
If property prices continue to grow at their current rate, the capital gain on an average priced property will be £28,412 annually. According to the Association of Residential Lettings Agents (ARLA) the vast majority of landlords keep their property investment for more than one year, and therefore benefit from the positive impact of house price growth in the longer term. Buy-to-Let lending reached its highest point since 2007. Reported lending of £10bn in landlord mortgages in the final quarter of 2015. So as the property industry continues to grow and landlords make the most of current market trends, are landlords correctly insured should the worst happen? We understand that protecting your investment is vital and have therefore put together a Landlord’s Guide for Insurance.
1. Check the small print.
Protecting your investment property may seem straight forward by taking out building insurance, however with it being such a valuable asset, it is worth checking the small print, as there are some specific and expensive loopholes that could potentially affect you in the long run.
2. Buildings Insurance
It is essential that you have buildings insurance in place, although contents insurance isn’t always required (although we would strongly recommend you take this out too). If you have a mortgage on your Buy-to-let property, the terms and conditions of your contract will state that you require buildings insurance, and it may be specific to that particular buy-to-let property.
3. Repossession Risks
If you cancel your policy, or fail to renew it, you could be faced with serious costs. As well as it being a technicality to the lender because the property is the asset in which they have lent, your mortgage lender could also take action under the Law of Property Act in receiver or repossession.
4. Buy to Let
You will need specialist buy to let buildings insurance or if you already have residential cover in place, you must inform your insurer you are letting the property to tenants. It may increase the premium, but you need their consent or your insurance could be void.
5. Void Periods
Most buildings insurance products lapse if the building is empty for 30-45 days, this is important when you consider void periods, or if you are thinking about refurbishing a property before lettings it.
6. Empty Buildings
If you know the property is going to remain empty its worth taking out specialised unoccupied buildings policy. Empty buildings are more likely to encounter problems as there is no one there to monitor/foresee issues, and although it’s an extra expense this could prove invaluable should something happen in an unoccupied building. E.g. squatters.
7. Under Insurance
According to ARLA almost 40% of properties are underinsured, which means in the event of a claim the full claim will not be paid. Remember you are not insuring the market value of the property but the rebuild cost and the only way you will now what this is, will be to instruct a surveyor to calculate it for you.
8. Loss of Rent Vs Rent Guarantee
Loss of rent is not to be confused with rent guarantee, as these are two separate things. Loss of rent is often included in a landlord’s buildings insurance policy. It covers the loss of rent if the property is damaged by anything such as flooding/fire etc. (whatever’s listed on your policy). It pays out up to an agreed amount.
Rent guarantee cover is separate, and doesn’t come as standard with buildings insurance. It guarantees cover for rental payments for a fixed period usually 6 or 12 months, if the tenants are unwilling or unable to pay. The premiums are also tax deductible.
9. Contents Cover
Contents insurance doesn’t come as part of a buildings insurance policy and it isn’t obligatory for landlords. However if you let a part furnished or fully furnished home you should cover your contents too. You can choose from a limited contents policy for up to £5,000 which is recommended even for sparsely furnished properties and will cost around £60 per year. If your property is fully furnished you must ensure the sum that is adequate to cover all of the contents in the property.
10. Risky Tenants
If you let to certain groups of tenants you may find it more difficult to obtain insurance, or you may find higher premiums. This includes students, single sharers and tenants in receipt of benefits.
11. A ‘covers everything’ policy
Specialist landlord insurance is a catch all policy that covers a range of insurances that can also be purchased separately. Can include, general buildings cover, loss of rent and liability insurance. You can also get add-ons such as content insurance, legal cover, rent guarantee and legal expenses.
Keylet understand that protecting your investment is vital and we hope this guide help’s any buy-to-let landlords, or those who are considering becoming a landlord. In conclusion, do your sums and see exactly what is included in each policy, don’t assume that an all-in-one policy is the best value as it depends what you require as a landlord. If you would like to discuss the process in becoming a Buy-To-Let landlord, or would like assistance with any legislation such as Rent Smart Wales, don’t hesitate to contact us.
Published: June 16, 2016BACK TO NEWS LIST