Buy to let - insurance
Choosing Buy-To-Let Property Insurance
By Don Suter
Risk is an area often overlooked by landlords, but failing to protect the main assets of your business, which
often have borrowings secured against them could lead to ruin.
Landlords often fail to understand the types of insurance risks that they are exposed to and are unaware that
insurance coverage for buy-to-let investments is very different to the standard household insurance policies that
cover owner-occupied dwellings.
Therefore, landlords are advised to seek the services of specialist insurance companies catering for the
Essentially there are five broad categories of landlords insurance:
-- Landlords buildings insurance
-- Landlords contents insurance
-- Emergency assistance
-- Legal expenses insurance
-- Rent guarantee insurance
Landlords buildings insurance
These are the core policies and will generally provide coverage for a number of perils including fire, flooding,
burst pipes, malicious damage and owner's liability.
It is worth checking the policies of each insurer as the perils covered may vary. Other issues to be aware of
are the amount of money the insurance company will pay out in the event of damage occurring, types of tenants
(student tenants are perceived to be higher risk) and consent to let from your mortgage lender, as failure to gain
consent will render your insurance void in the event of a claim.
Landlords contents insurance
Many landlords insurance specialists will offer the option of limited or full contents insurance.
Limited contents policies are designed for properties that are let unfurnished or part furnished. A typical
policy would provide cover of up to Â£5,000 for items such as curtains, carpets, white goods and light fixtures.
Most policies will also provide employers and landlords liability cover in relation to these products.
Liability cover is important, as the number of personal injury claims relating to contents has risen at an
astonishing rate since the 1990s, with awards in excess of Â£100,000 not uncommon.
Full contents policies are for fully furnished properties or for limited contents that would cost more than
Â£5,000 to replace. When applying for full contents insurance, ensure you value the contents for the cost to
replace them, opposed to the actual value that you think they are worth.
Cover is provided for general property emergencies, such as failing electricity supplies and cooking facilities,
plumbing problems, leaking roofs and guttering, and damage to doors and windows.
Typical policies will provide parts and labour up to a specified cost, along with a 24-hour call out helpline
This sort of insurance is most suited to landlords who do not live near their property and have not contracted
their managing agent to provide such a service.
It should also be noted that these policies only cover emergency call-outs and are not a general repair service
required through lack of routine maintenance.
Legal expenses insurance
Problems can always occur with tenants and in many cases it is a change of personal circumstances such as job
loss, accident or illness that will affect the tenants ability to pay rent or look after the property
Resolving such situations will usually involve expensive legal costs, sometimes running into thousands of pounds
and legal expenses insurance is generally recommended.
Rent guarantee insurance
These policies guarantee that rent is received regardless of the tenants personal circumstances or ability to
pay. These policies are most useful for landlords who have a mortgage on the property and are relying on the rental
yield to service the loan. Policies will often guarantee rental payment for periods of six or twelve months.
It is always advisable to shop around for insurance and understand what each policy provides. Always ensure that
the insurance provider is a member of the General Insurance Standards Council (GISC) and is fully regulated by the
Financial Services Authority (FSA).
Please note that this article is for information and guidance purposes only. With all financial matters you
should seek professional advice with respect to your own specific circumstances.
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