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Ask the expert... landlord insurance
publication date: Jun 2, 2010
“Our landlords are cutting down on insurance. How do I convince them that this is a really bad idea?” Andy Wynne Jones, Head of Underwriting and Product Development at HomeLet has the answers.
Q First things first – why do landlords need specialist buildings and contents insurance?
A It is a surprisingly common misconception that a run-of-the-mill homeowner’s buildings and contents policy can cover a property once it is let. Landlords that proceed down this route should do so with caution.
Becoming a landlord carries legal responsibilities that are all too often overlooked; a good quality policy will include tailored liability cover in the event of negligence on the part of the landlord. A specialist landlord’s policy will include essential covers to cater for the risks associated with letting a property.
Much as we wish it wasn’t, it is a fact of a life that let property will be unoccupied between tenancies at some point – another key area of cover. Quality policies will cover you for up to 90-day void periods without any restrictions, onerous inspection requirements or the need to drain your water system – ordinary owner occupier policies will not apply if the property is tenanted.
Q In the event of a disaster, what happens if the tenant has to move out?
A Chances are you’ll still need to pay your mortgage. A fire, a flood or even a water leak from a pipe can cause a lot of damage and, repair costs aside, take a long time to put the property back to a lettable condition. Specialist policies cater for this and provide for lost rent during these periods – this is essential cover if you still have bills to pay.
Accidental and Malicious Damage cover should also be an option. You may be holding a deposit but what if the damage caused by the tenant is more than the cost of the repairs?
Emergency Assistance cover is also valuable addition to any specialist policy – you don’t want a call at 3am from your tenant with water coming through the ceiling, or with no electricity – make sure your insurers get the call, not you.
Q Does a landlord still need specialist contents cover if their property is unfurnished?
A Unfurnished lets are preferred by many landlords but what does this actually mean? Does the property have carpets, curtains or blinds? Light fittings, a fridge, freezer, cooker and washing machine? All of these are contents and yet we still refer to this as an unfurnished let.
Specialist contents policies are available for unfurnished properties. They will cover the basic contents outlined above, and in today’s litigious society, should also include tailored liability cover to protect the landlord. The tenants may trip on some loose carpet, they may even electrocute themselves on the cooker – landlords need the right protection.
Q What exactly is covered when a property becomes uninhabitable?
A This depends on the policy. An unoccupied property, to an insurer, is a greater risk than an occupied property. Claims tend to be more frequent and usually cost more to put right as the damage may not be found straight away – burst pipes are just one example.
It may sound obvious but you should be looking out for policies that give you full cover for a good period of time, with no requirements to inspect the property or drain the water system. Some specialist policies will give you 30 or 60 days cover before restrictions kick in – you’d hope to have a tenant before then, but can you guarantee it? Policies that offer 90 or more days may seem excessive but usually will not cost any more.
Q What are the most common liability claims?
A We live in a ‘sue’ culture. Daytime television is packed with ‘no win no fee’ advertisements. Landlords need to ensure that they have adequate protection against anything that could be classed as negligence – specialist landlord’s insurance caters for this.
These are real examples of serious issues that have affected our landlords. Injury claims will be costly to settle if there is found to be negligence but even if it is clear that there is no accountability on the landlord, you will still incur the solicitor’s costs:
BUILDINGS INSURANCE CLAIMS
Storm torrential rain – drains fl ooded property causing signifi cant damage leaving the property uninhabitable for an extended period of time total cost £102,897 (£26,993 in alternative accommodation)
CONTENTS INSURANCE CLAIMS
Police forced entry as drugs inside property and also internal damage done by Tenants – £6,716.