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Everything a landlord needs to know about insurance

As a landlord, one of your main priorities will be to protect your investment. This means you need to have the right kind of cover otherwise you could end up footing the bill for anything that goes wrong with your rental home(s).

Most tenants will treat your property with the respect it deserves and cause you no hassle, but when you hand over your house to tenants there are no absolute guarantees over anything. So it pays to be protected.

A comprehensive landlords’ insurance policy is made up of a number of different elements. Below, we outline what types of cover landlords will need to give themselves proper peace of mind.

Letting Solutions August 2016 Blog 1

Firstly, though, it’s important to point out that landlords’ insurance isn’t mandatory (although some lenders will insist you have it before they will allow you to take out a buy-to-let mortgage). As we’re about to set out, though, not having thorough landlords’ insurance could cause you all sorts of issues at a later date.

Contents insurance

This does what is says on the tin, insuring that all the contents of your property (beds, carpets, sofas, wardrobes, TVs and other possessions) are protected from theft or damage.  It’s a key piece of cover for landlords, especially those landlords who are renting out property that is part or fully-furnished.

You should also consider cover for accidental damage, which can range from coffee or red wine stains on fancy rugs to broken computers and smashed mirrors. You can claim these items on your insurance and, depending on the circumstances and the small print of your policy, you could receive brand new replacements for these damaged goods.

Also, to avoid any confusion further down the line, you should be clear that – as a landlord – you have no obligation to insure your tenants’ belongings. That is entirely their remit.

Buildings insurance

This is one of the main, and arguably most important, types of cover for a landlord. As the name suggests, it quite literally protects the very bricks and mortar that your property is made up of.

It will protect your property against fires and flooding. If your rental home was unfortunate enough to suffer either of these incidents, the buildings insurance would cover the cost of rebuilding and refurbishment – including kitchens and bathrooms.

Loss of rent insurance

As a landlord, there could be a situation that arises where your property becomes uninhabitable and you are unable to let it for a certain period of time. Loss of rent insurance would help to offset the income you will be missing out on while your property remains empty.

If you are relying on monthly rent to fund your monthly mortgage repayments, such a policy could be crucial, ensuring that you keep paying off your mortgage even while you have no tenants in place.

Of course, if you don’t meet your mortgage repayments each month, this can lead to all sorts of problems – with your property going into arrears and possible repossession. Loss of rent insurance would give you peace of mind that such a turn of events wouldn’t occur should your home be out of action for a while.

Rent guarantee policy

A rent guarantee policy is designed to protect the landlord if the  tenant fails to pay the rent.It covers up to a certain amount of rent.  It aims to give landlords the  peace of mind that they won’t lose out if a tenant can no longer pay the rent due to loss of employment, or illness, or other circumstances. Policies may also provide legal expenses covering  the cost of legal fees when seeking to evict a tenant. A legal advice helpline may also be included.

Guaranteed rental payment

This kind of policy guarantees to pay the rent every month whether the tenant has paid or not (not to be confused with the more common rent guarantee). This sounds too good to be true, but a good policy of this kind, if properly set up with the right company, can be remarkably effective and alleviate worries over non-payment of rent.

Liability insurance

This is usually an add-on to most policies and is particularly important if you provide student accommodation or social housing. Liability insurance will protect you against tenants suing for an accident that occurs on your property.

To give yourself peace of mind over any possible injuries or accidents in your property, it’s a wise move to take out this kind of insurance.

Emergency cover

You’ll hear this one lots on TV adverts and it’s another type of insurance with the purpose in  the name.  If your rental property was subject to a burst pipe, gas leak, break-in or pet infestation, emergency cover would cover the cost of the emergency repairs.

Emergency cover also provides for call outs to rectify any household emergencies, day and night, 365 days a year. Call-out charges, labour and materials will all usually be covered in the policy. The exact  issues covered and any caveats around  attendance at emergencies should be examined carefully.

It can also be a good idea to check whether the emergency call outs will be done by the providers own work force, or separate companies,  as this might affect the quality of the service.  Some providers refer to  attendance at emergencies within 2 hours but this might not be quick enough for some emergencies – for example involving water – as considerable damage might have been done in that time.

While all this might sound like a lot, each different type of insurance has a very specific and important function. Covering yourself with the above insurance also won’t cost as much as you think it might and, in the majority of cases, policies will offer several types of cover all at once, so these won’t need to be paid for separately.

Unfortunately, as much as we’d like to say it doesn’t, letting property does come with risks. Things rarely go by without a hitch. Things break, things get smashed and events outside your control are likely to happen. What you can do, though, is make sure you are adequately covered.

Here at Letting Solutions, West Lothian’s first dedicated lettings agency, we can help you to get on top of all the cover you need. Please get in touch with us on 01506 496006 to find out more.

If you would like to get an idea of how much you could be charging your tenants in rent, check out our free and instant online valuation tool.