According to the website Emerging Property, landlords need to invest an average of £74,250 in the purchase of a buy to let property – including the deposit, mortgage arrangement fees, surveyors and conveyancing fees, Stamp Duty, and refurbishment costs. And that’s before the monthly mortgage repayments are even taken into account.
In other words, there is a considerable sum of money at stake and insuring the property you buy needs to be given a high priority. If you have a mortgage on the property, your mortgage provider will require that you have adequate buildings insurance to protect both your financial interests.
So, here is a quick guide to let property insurance – also known as buy to let insurance or landlord insurance.
What makes it so important
What makes let property insurance so important is the unique nature and extent of the protection it offers.
It is entirely distinct from regular home insurance by virtue of the simple fact that tenants – rather than you and your family – occupy the property. The risks to the premises themselves, and to the business you are running as the landlord, are entirely different from those encountered by an owner-occupier.
With that in mind, here is a brief guide to some of those principal areas of protection:
- since you are already likely to have invested an average of more than £74,000 in the property and continue to make the mortgage repayments, building insurance is probably the central plank of your let property insurance;
- it safeguards the building even against the very worst case of the premises being completely destroyed and in need of reconstruction – so the total building sum insured typically covers such a sum;
- as the landlord, you may have items in the property which you own – especially in common areas such as hallways, lobbies and staircases, for example;
- while your tenants are responsible for insuring their own possessions, any of your own may be protected by the contents insurance incorporated into your let property cover;
- some let property insurance policies even include cover against malicious damage – to the structure of the property or your contents – caused by your tenants or their visitors, including those tenants who may be unemployed or in receipt of welfare benefits;
Landlord liability insurance
- the moment you become a landlord, you also assume a legal responsibility for taking every precaution to prevent injuries to – or damage to the property of – your tenants, their visitors, neighbours and even members of the public;
- if someone suffers an injury or has their property damaged in some way connected with your let property, therefore, you may be held liable and ordered to pay a substantial sum in compensation;
- given the potential scale of such claims, landlord liability indemnity insurance is typically at least £1 million, but some insurers increase standard cover to as much as £5 million per claim;
Compensation for loss of rental income
- let property insurance may also recognise the importance of maintaining the income stream from your tenants, even when the property is temporarily uninhabitable following a serious insured event;
- in that case, your landlord insurance policy may provide compensation for any resulting loss of rental income – up to prescribed limits, usually based on a percentage of your total sum insured.
This brief guide to let property insurance may have helped to underscore the importance of such cover and identified some of the principal headings under which both your let property and your business are safeguarded.