Buy to let home insurance
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What is buy-to-let home insurance?
This can just as easily be found filed under the alternative title of, Landlords Insurance, just so you know, as anyone who effectively owns a property and rents it out to tenants is generally referred to as a landlord. Now that we’ve clarified that though we can get a handle on what it is.
As the property market witnessed unprecedented highs (albeit followed by equally crashing lows after the recent global recession; although staging a remarkable comeback in the last few years we might add), hanging onto its coattails was a new breed of investor with an eye for making money in the longer term. A very British phrase – if not an exclusively British phenomenon – buy to let in essence is the acquisition of a property specifically to then place on the booming rental market to let back out. The objective being to have a constant income stream working away in the background which will pay off the mortgage the investor took out on said building (and possibly leave some over) during the quiet property times, while all the time crossing their fingers
that the value of their property will rise so much during the forecast boom years that they will then have one final pay day as and when the time is most financially prudent.
Naturally nothing in life is ever this straight forward and uncomplicated, hence why buy to let home insurance is billed as a must for landlords (prospective and existing) so as to have a plan in place should anything go a bit awry.
Like for example flooding – caused either by Mother Nature, dodgy pipes or simply tenant’s accidentally leaving a tap running – fires and perhaps more criminal damage occurring. This is after all one of your biggest assets, if not THE biggest, so therefore you need to protect it from every angle.
Even more so if the actual building is a little bit more niche or out of the ordinary, and as a result of any damage compromising its very structure would require specialist re-building; and with it more ‘specialist’ costs. For example listed and graded properties, timber-framed buildings or houses with thatched roofs. All of which would stretch the re-build budget in the event of a catastrophe.
Mercifully though, a dedicated buy to let/landlord insurance policy will go some way to alleviating the financial pain and strain of such scenarios panning out, and why arranging a far-reaching one with a leading provider is essential if you’re serious about making a move in this investment market.
Buy to let insurance is a vitally important insurance product to have so as to provide buildings and contents cover for your property which will effectively safeguard it against a cross-section of potential risks. And when we say safeguard, we specifically refer to the entire building, from its foundations and bricks and mortar up to its roof and pretty much every construct – fixed in or otherwise – found within its four walls. Or however many external walls it offers. And internal walls. And not just walls, but the doors and windows too. Plus any furniture which belongs to the policyholder.
The list can, potentially, be almost infinite, depending on the individual needs of the property owner and the preservation orders they wish to impose to ensure and maintain their newly-acquired construct. A money-absorbing construct which they plan to put in the hands of complete strangers in most cases.
In terms of what a typical buy to let home insurance policy covers, there’s usually a sliding scale determined by both the insurer you opt to go with and the particular policy that you buy into. However the average stipulations, conditions, features, policy bases (call them what you will) covered in such an instance include the likes of; buildings insurance cover, public liability cover, new-for-old contents cover, cost of re-housing tenants cover, repair or replacement of a broken boiler cover, glass and locks replacement cover, access to free 24/7 legal helplines, multi-property discount (if as a landlord you own more than one rental property), accidental damage cover, loss of rent cover, malicious damage cover, theft by tenant cover and landlord legal expenses cover. A whole lot of cover, we think you’ll agree.
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Do I need buy-to-let home insurance?
The necessity of a buy to let home insurance policy cannot be overstated enough for our part, and it’s our duty to stress that a simple, conventional home insurance policy will NOT offer the standard nor breadth of coverage which applies to those choosing to secure their property in the rental markets.
It’s not just the structure which requires protecting from the elements and unforeseen eventualities of altogether different natures, but your rental income stream as a landlord. Aside from damage to the building sustained for a variety of reasons (floods, fires, storm, etc…), there’s also the underlying fact that as a landlord you would be held responsible (and accountable) for arranging – and meeting the costs of – suitable alternative accommodation for your tenants in the event of them being temporarily without a roof (ostensibly, your roof) over their heads through no fault of their own.
Would you have the monetary means to support this without having a buy to let home insurance plan in place? And obviously then the bankrolling of the repair/building work which would need to be carried out and completed before you could even think about your tenants moving back in to the property; all of which costs money. Money which would be increasingly difficult to source while the building lay idle.
Other scenarios equally as daunting – yet feasible – include the situation which might unfold if your tenant failed to pay the rent, which in turn had a knock-on effect with your ability to repay the mortgage. Which again could impinge drastically on your personal finances.
There’s no way around avoiding buy to let home insurance policies if you are a landlord operating in the rental market – or considering entering it – and nor should there be as far as we’re concerned, as you’d be ill-advised to believe that a standard home insurance plan in your own name would afford you the same degree of defence in these hypothetical instances. But then the responsibilities to your insurance provider, your tenant and indeed, yourself don’t end there, as you need to maintain channels of communication with your buy to let home insurance provider on a regular basis to inform them of any changes which could nullify your existing policy agreement. Such as a change of tenants or any ‘void’ periods where the property lies empty for in excess of 30 days, generally speaking.
How much does buy-to-let home insurance cost?
Any buy to let home insurance policy’s cost (and thereafter calculated premiums) will depend on the individual policies and plans you have underwritten into the agreement from the outset, the less simplistic and rudimentary it is, the higher the premiums it goes without saying.
However what does need reiterating is that you get what you pay for with this insurance product, and we’d always advise landlords to be shrewd and make sure they leave no stone unturned from the off. This means plumping for buildings insurance, sum insured cover, malicious damage, contents insurance, loss of rent and home emergency as the barest of minimums.
Quickly reminding ourselves which is which and what covers what, buildings insurance refers to the defence of the property from fire, floods, storm damage, criminal vandalism and is nearly always demanded from the property owner before a mortgage lender will rubber stamp a mortgage agreement; and more than likely offer their own policy. Although these normally tend to come with higher premiums than if you were quoted by an independent buy to let home insurance provider.
Sum insured is the maximum figure a policyholder can claim in the event of their insured property being comprehensively destroyed as a direct result of fire, floods, storms, etc… and should represent the rebuild cost of the building from scratch, and NOT what its current market value is. Two entirely different figures. A professional can quote you for a rebuild price, or your insurer can provide an estimate based on type and age of property amongst other key and decisive factors. Just remember, if the sum insured is too big, the policyholder risks paying extortionate premium prices, yet conversely if too small, this poses a potential insurance shortfall after a claim.
Elsewhere and malicious damage is self-explanatory in as much as it covers the policyholder against a grudge-holding tenant/former tenant kicking a door or window in on your rental property in an unpredicted pique of rage, so therefore encompasses glass, lock and key replacement measures as part of its policy remit, while contents insurance safeguards the landlord’s furnishings (part or full) which they’ve left in the property and thus used by the tenant. Even if seemingly unfurnished, it makes sense for a landlord to arrange contents cover if only to guard against damage to curtains, light fittings or kitchen appliances which form part of the fixtures and fittings within.
Meanwhile, loss of rent is hugely important if a landlord relies on the monthly rental income to cover a sizeable monthly mortgage repayment, which would be severely compromised in the aftermath of the property befalling substantial damage which leads to the tenants having to relocate temporarily until such time as the building is considered safe and habitable once more.
Finally, home emergency offers a ready line of defence against the possibility of burst pipes, broken boilers, et al, affording the landlord a 24 hour helpline so that emergency repairs can be carried out quickly and efficiently by qualified and experienced tradesperson at no initial, up-front cost to yourself.