It might seem strange to buy something you hope you never need to use. If you own property that you let to tenants, though, the purchase of buy to let insurance is likely to prove an important consideration.
Landlord insurance offers a critical safeguard on which you hope you never need to rely, but which protects the investment you have made in the property and your aspirations for a successful business.
What makes it critical and what protection does landlord insurance give you?
Insurance for property landlords
As the landlord of property, you are running a business reliant on the rent you receive from your tenants. That fundamental objective makes your property quite different from one that is occupied as the residence of its owners.
In that way alone, buy to let property is distinguished from an owner-occupied home – and the landlord insurance that protects it is similarly distinguished from standard home insurance, as the Money Saving Expert has explained.
The difference is so significant that if you attempt to rely on standard home insurance for a property that is, in fact, let to tenants, you are likely to discover that the cover is invalid and any claim you subsequently make is rejected out of hand by your insurer.
Although similar in some respects, landlord insurance offers significant extra forms of protection when you are running a business from the property:
- unsurprisingly, landlord insurance shares with home insurance the main objective of protecting the structure and fabric of the building itself – against such a wide range of potentially serious risks as flooding, escape of water, storm damage, fires, impacts (from vehicles or falling objects, for example), theft, and vandalism;
- as the Association of British Insurers (ABI) explains, building insurance typically covers a worst-case scenario in which the property is totally destroyed and needs to be rebuilt;
- some landlord insurance properties also include optional cover for malicious damage caused by your tenants or their visitors;
- your landlord insurance policy may also cover theft, loss or damage of those contents you continue to own in the let property;
Landlord liability insurance
- probably one of the more critical elements of cover you need is indemnity against claims made against your liability as the landlord;
- as the landlord, you may be held responsible for injuries or property damage suffered by your tenants, their visitors, neighbours or members of the public through any contact with your property;
- claims such as these – and the cost of defending them – may reach very significant sums, especially if injuries have been sustained;
- for that reason, landlord insurance typically incorporates a minimum of £1million of indemnity insurance – with some policies offering as much as £5 million as standard;
Compensation for loss of rental income
- recognising still further that your property is run as a business as the source of income from rents, landlord insurance may also make provision for any occasion when the premises are temporarily uninhabitable pending the repairs and reinstatement necessary after a major insured incident;
- in those circumstances – and to maintain the income on which your business relies – landlord insurance may offer compensation for lost rent (up to limits which are often related to the total value insured).
Finally, don’t forget that if you have a mortgage on your let property, typically it will be a condition of your mortgage agreement that you have adequate buildings insurance in place at all times. Failure to do so could see your mortgage provider demand that you repay the outstanding mortgage balance immediately.