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Insurance - UK Property Investors

Like any business, one of the critical things for any landlord is to be properly insured.

Author: Chris Horne

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Building & contents

Like any business, one of the critical things for any landlord is to be properly insured. Failure to do this on any level could prove to be a very costly mistake. As a landlord you are effectively running a property business. As such your main asset is obviously your buy-to-let investment and it’s critical that you safeguard the value of this should disaster strike.

Do I need specialist insurance?

Because of the nature of buy-to-let it is necessary to have specialist insurance. This is because most household policies offer no cover for buildings, contents and landlord’s (property owner’s) third party liabilities; while the property is being let out.

What does my insurance actually cover?

Most insurance policies have two elements to them. The bulk of any expense relates to insuring the structure of the building. Most policies also cover fixtures and fittings which include such items as: carpets, laminate flooring, kitchens, bathrooms, white goods, light fittings and curtains. This cover is perfectly adequate for most landlords that let out an unfurnished property. It is worth checking that the policy has some provision for cover against accidental breakage of sanitary fittings and fixed glass such as windows as these are one of the most common areas of damage. One thing to be aware of is that theft is only covered if there has been ‘forcible or violent entry or exit’. This effectively excludes the situation where your tenants decide to make off with your appliances and kitchen for example. This is why having an adequate deposit is vital.

It is also possible to insure separately any contents in the property such as furniture. Again the policy will only protect you against damage by the tenants not property theft.

How much should I insure my property for?

The level of buildings cover will depend on a number of factors that relate to the rebuilding cost of your specific property. It is possible to carry out a pretty accurate estimation of this using the Building Cost Information Service (BCIS) which is part of the RICS. This calculator takes account of the area that the building is in, the type of property and its’ construction and will then generate a reinstatement value on which to base the level of insurance you require.

Things to watch out for:

There are a few things that the novice or first time buy-to-letter should be aware of:

* Don’t be tempted to underinsure – if you do you might save a few quid but if disaster strikes you could be out of pocket by tens of thousands. That risk reward ratio just doesn’t add up!

* Check the level of your excess. This is the amount of the claim that you are required to pay. It effectively controls the viability of small claims. The larger the level of excess generally the cheaper the policy. However, landlords should avoid going for too high an excess as this will effectively preclude making a claim for many of the small more numerous items. An excess of around £100 is normally ideal.

* Be aware that most policies will exclude theft by the tenant. This means that where the tenant has effectively stolen items or fixtures from your property and done a bunk these may not be covered by your policy. You should ensure that this aspect of any potential loss should be adequately covered by your deposit.

* Most companies will automatically index-link your policy to make sure that your reinstatement value is maintained in subsequent years. It is worth checking this when you take the policy out.

Property Hawk recommend Alan Boswell Insurance, we’ve found it to be highly competitive on price as well as very comprehensive on cover and have partnered with them to obtain special discounted rates for Property Hawk users.

Other specialist B2L insurance brokers are Endsleigh, and Simply Business

Every landlord requires at the very least building insurance for their properties. Next to a mortgage, insurance is typically the next largest expense and therefore it’s worth shopping around to get the best deals. In our Recommended Links we have featured a range of leading insurance companies and brokers that offer some of the most attractive rates in the market for buildings and contents insurance.

Legal indemnities

As well as building and content insurance there are a whole range of legal indemnities that may be required to indemnify you or a potential lender against a third party claim arising from shortcoming in the conveyance. These can often relate to ownership, lost documents, access, poorly worded legal documents or perhaps where a restrictive covenant imposes specific restrictions. These details are often only discovered at a late stage in the sale proceedings and can prevent the purchase of a property going ahead.

Examples of the most common circumstances where they are required are given below:

* Restrictive covenants
* Defective titles
* Lost title deeds
* Possessory titles / adverse possession
* Lack of adequate access and / or services
* Maisonette indemnities
* Flying freehold

Rental guarantees

One of the biggest worries being a landlord is that having got in what on the face of it is a respectable tenant; they suddenly stop paying the rent. When you are relying on this income to pay the mortgage, this can be a real financial blow.

Is there anything I can do to safeguard against this type of financial hardship? Yes; a number of companies now offer rent guarantee insurance that allow you to protect yourself against this very eventuality.

This insurance is normally associated with the completion of financial reference checks on the tenant. Have a look at our Recommended Links to view a selection of our chosen providers.

About Author

Chris Horne (39) a qualified town planner and surveyor as well as being the author of the ‘Landlords Bible’ has been involved in all aspects of property from working as a planner in a local authority dealing with planning applications to being a consultant in the oldest surveying practice Drivers Jonas in the West End of London, and working for English Partnerships in the Midlands. He is now a full type landlord and investor. Chris has also started the website http://www.propertyhawk.co.uk a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all the financial data relating to their portfolio. It allows users to print tenancy agreements and other forms. The site generates a real time rent book for each property as well as calculating a landlord’s tax liabilty. The service is totally free to use at http://www.propertyhawk.co.uk . The Landlord's Homepage.

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