Landlords Building Insurance
For a landlord who has just acquired a building with the intention of using it for buy to let purposes, cover for the building itself will be the main priority. The basis of the policy will be a range of perils, fairly similar to that you can obtain for your own domestic house. It will just be noted on the policy that the property is let to tenants. Obtaining suitable cover will undoubtedly be a condition of your mortgage and whilst most lenders are only too keen to sell your their own buildings and contents cover for your own home, when it comes to landlords, many are unable to offer the correct form of cover and you are left to make your own arrangements. In practice, this is not too difficult, there are now many insurers and brokers that are able to offer buy to let quotations and shopping around will enable you compare the premiums and terms on offer. When you settle on a suitable contract, make sure the lenders interest is noted under the policy wording. Many landlords have reported a delay in having funds released, whilst waiting for the necessary insurance paperwork to turn up. Lenders, in general do not like releasing money unless they have proof that a building is adequately insured and their financial interest is noted.
Locating your market in advance is a good idea, as is discussing your plans for the property with the broker or insurer. Most policies are arranged on the basis that the property is already tenanted, but in many instances, this is not the case. Often, property is bought at auction or when purchased is in need of a makeover. In these cases, their can be a period of unoccupancy and many insurance companies are not to keen on this. Always point out periods of unoccupancy to the insurer and mention what work you are having carried out to the building to bring it up to scratch. You may find that the insurers are prepared to allow you a period of 30 days before the tenant moves in, ask what would happen if this period is breached. You may find that once you go over a certain period of time , that cover is severely restricted. Often preparing a property for rental, can take longer than expected and in some cases, finding a suitable tenant can also result in a fairly long delay. It is also worth remembering that many polices contain certain terms and conditions that will place a requirement on you to comply with any current legislation with regard to the letting of property, make sure that you study all terms and conditions most carefully.
As well as the broad range of perils, cover should also include loss of rent. This is an important section of the policy and you should check to make sure that cover is included. At least one major product provider only includes this as an optional extra and it is easy to overlook. This section of the policy provides valuable cover if the tenant has to move out following an insured period rendering the building uninhabitable. Many landlords can appreciate the various perils that can occur at a property but fail to grasp what would happen to their rental income during the period of reinstatement following a loss. The mortgage will still have to be paid and with no rental income , this can place a large strain on funds. This section of the landlord property insurance policy does not include cover for tenant default, this is a separate type of cover
Landlord buildings cover depends on a number of factors. In common with home insurance, you will need to advise the insurers, the location of the property, its construction and the rebuilding cost. As well as this information, they will need details of previous claims and if the property is in an area that has suffered from flooding or subsidence. One additional rating consideration for this class of business, is the type of tenant in occupation at the property. Our research has shown that the type of tenant can have a bearing on the insurance premium charged, as far as we can make put, there are a number of different groups. Firstly, and the cheapest are buildings that are rented to professionals. The term professional seems to be employed in quite a loose sense as it seems to apply to anyone that has a job. Another group includes students. A third group is for people that receive help with their rent from a local authority and finally, there is a group where property is let to a Third Party such as a local authority or a housing association. Premiums seem to vary depending on who holds the contract for letting but you will have to do your own research on this matter. There seems to be very little you can do to obtain a discount on this type of cover, in some cases, offering to pay a higher excess may bring the premium down a little but most insurers don’t seem to offer much else. One thing to consider is that often brokers and insurers are keen to provide quotes on insurance portfolios and if you have a number of properties you may be able to agree a block discount.
Easily the most widely taken out is, Landlords Building Insurance, if you have a loan on the property from a mortgage provider, they will insist that you take out building cover and make a note of their interest on the schedule. The policy will have to satisfy the council for mortgage lenders hand book conditions and will thus have to provide you with a broad range of risks.
Most polices that are available are based on a Home policy and all the usual risks you would expect to see such as; Fire, Storms, Floods, Theft etc will be included in the policy wording. There are slight differences between a home policy designed for rental property and a standard policy wording.
Firstly, the provider will be aware that the property is being used for letting purposes and the liability section of the policy will take this in to consideration.
Secondly, the section relating to ” Alternative Accommodation” will be replaced by Loss of Rent Cover. This cover will indemnify the Landlord if he is unable to collect rent from the tenant following an insured peril occurring at the property. The tenant may have to be moved out temporarily and the landlord will suffer from a loss of income.
It must be remembered that this section of the policy covers loss of rent by perils, it does not cover loss of rent by tenant default. Tenant default cover, can be obtained by buying a Rent Guarantee Contract. There are a large number of buy to let buildings insurance policies on the market and the covers do vary slightly between providers.
You should be provided with a Key facts document and this will outline the cover on offer.