Despite an increasingly rigorous legislative and regulatory regime, investment in buy to let property remains an attractive proposition – according to research conducted by Totally Money, for example, rental yields in some of the UK’s university cities reached as high as 11.99% in the fourth quarter of 2018.
But hand in glove with any investment in buy to let property goes the importance of landlord insurance – so, here are some frequently asked questions about that cover:
Do I need landlord insurance?
As the owner of any type of buy to let property you are under no legal obligation to arrange landlord insurance. Do note, however, that if your property is mortgaged, then as a condition of your mortgage contract, you will typically be required to have appropriate buildings insurance in place to protect both your financial interests.
Even if your property is not mortgaged, given what is likely to have been a substantial investment in the property and its contents, together with other risks faced by your business, without landlord insurance you are vulnerable to substantial financial losses in the event of unexpected events, damage and claims.
What are those risks?
The risks to your physical assets relate to the possibility of loss or damage to the structure and fabric of your let property – from such events as fire, explosions, flooding, impacts, storm damage, escape of water, vandalism and theft.
Landlord insurance indemnifies you against such losses – including the worst case scenario in which the property and its contents are totally destroyed, and the premises need to be reconstructed, with the help of somewhere like this commercial roofing denver company if the roof has suffered a significant amount of damage, as well as replacing any contents within the vicinity when you can.
The scale of such losses is such that any buy to let mortgage lender is almost certain to insist that adequate building insurance remains in place at all times.
Some insurers may also extend – as standard – cover against the risk of malicious damage to your property and its contents caused by your tenants or their visitors.
What are some of the other financial risks?
As the landlord, you have responsibilities in common law to take every reasonable precaution against the risk of injury to your tenants, their visitors and members of the public or damage to their property. Any breach of that duty of care may result in liability claims against you.
Typically, landlord liability indemnity provides at least 1 million of cover, but there are some landlord insurance providers who offer 5 million of liability cover as standard.
Landlord insurance policies also recognise the potential for loss of rental income following an insured event which leaves your let property temporarily uninhabitable, pending repairs and reinstatement.
In that event, your insurance may provide the option for compensation for loss of rental income – up to defined limits, often determined as a percentage of the total building sum insured.
Does my landlord insurance cover tenancy voids?
There may be times when your let property experiences a void – a period when there are no tenants in occupation, because of a gap between one tenancy ending and a new one starting or for some other reason.
That is when you need to be thoroughly familiar with the details of your landlord insurance policy, since cover is likely to be severely curtailed, or may lapse altogether once the premises have been left empty for longer than a specified number of consecutive days – typically between 45 and 60 days, depending on your policy.
In that event – to maintain protection of your let property and to comply with your mortgage lender’s requirement for adequate insurance cover at all times – you may need to consider standalone unoccupied property insurance.
