.
A
typical Landlords INSURANCE policy
will cover 4 main types of INSURANCE
for a single premium
-
Building Insurance
- Cover
for loss of rent in the event of a claim
- Landlord's
Liability
- Legal
Expenses
Additional
Insurance can be obtained for
- Contents
Insurance
- Rent
Guarantee
- Portfolio
Insurance
- Mortgage
protection
- Illness
/ life
Prices
will vary widely as insurance providers calculate
the cost of the premium on several factors such as:
- The
location of the properties (postcode)
- The
sum Insured
- The
type of tenants in the property
- Your
history of claims
- The
age of the properties
- The
type of properties (flat, detached, terraced etc.)
Buildings
Insurance
A
mortgage lender will insist that a property is protected
by Buildings INSURANCE.
It is the very minimum insurance all properties should
have. It usually pays out if the property is damaged
or destroyed by fire, floods or subsidence and should
include damage to fixed fittings such as baths and
kitchens, sheds, greenhouses and garages. If the property
is leasehold (such as a flat in a block of flats)
the freeholder may have arranged buildings insurance
for the whole block, in which case, a separate policy
is not needed.
Cover
for Loss of Rent In The Event Of A Claim
This
INSURANCE only refers to reimbursing
the Landlord if the property is rendered unfit to
live in and the tenant has had to be housed elsewhere
for any reason covered under the Buildings
INSURANCE. It will usually pay a percentage
of the rent due for the period the property is unfit
while repairs are made or until the policy expires.
The Landlord is usually able to choose the percentage
level from 20% to 100% at a sliding cost scale.
Landlord
Liability
A
landlord is responsible for the safety of the property
that the tenants are living in. This means that should
a tenant harm themselves due to something dangerous
in the property they can make a claim against the
Landlord for damages. For example, a tenant may electrocute
themselves on a faulty light switch and badly burn
their hand as a result. The Landlord Liability
cover will pay for any damages that are awarded to
the tenant as well as all legal costs.
Legal
Expenses Insurance
This
is to protect the Landlords legal rights upon breach
of the tenancy agreement. It will cover legal costs
over unpaid rent, damage to property and removal of
squatters. A Landlord may also incur legal costs as
a result of a dispute with the tenant over unauthorised
alterations to the property or unauthorised use of
the property. Sometimes, costly legal proceedings
may be the only way to evict tenants and gain possession
of the property once again.
Contents
Insurance
Contents
INSURANCE is not required by a mortgage
lender, however, it is considered essential for a
property that is let fully furnished or for an HMO
as it financially protects the contents of the property.
For a landlord INSURANCE policy,
when an insurer talks about insuring contents, they
are not talking about the tenants contents. Insuring
these is the responsibility of the tenants themselves
and can be done through a normal home INSURANCE
policy.
The
contents that can be insured are items that the Landlord
owns in the property but which may become damaged
such as carpets, sofas, tables, chairs and pictures.
Many insurers also insure communal contents which
are situated in communal areas in blocks of flats,
or properties with multiple types of tenants. It is
possible have contents insurance added to the buildings
INSURANCE policy or to have a separate
contents INSURANCE policy
Rent
Guarantee Insurance
This
can be taken out to cover the loss if a tenant can
not or will not pay the rent. Even tenants with the
best reference sometimes fail to pay their rent due
unforeseen circumstances such as redundancy. Rent
Guarantee INSURANCE is a relatively inexpensive
way to limit the risk of financial loss if rent payments
suddenly stop. It will pay out in the event the tenant
fails to pay the rent for most reasons they could
come up with. It is usual for a policy to pay the
rent due up to £10,000 per claim (subject to
a maximum of £2,500 per month), minus an excess
of one month's rent.
The
cover should continue until the tenancy agreement
expires, the policy expires or when possession is
gained by the Landlord. The Policy usually does not
cover a let property until the first months rent and
deposit has been paid. In the event of a claim, Insurance
Providers will insist that proof of adequate tenant
reference checks is provided. The cost of the Rent
Guarantee INSURANCE policy will usually differ
according to the level of risk the Landord will accept,
how long the replacement rental payments are to continue
and limitations on legal costs covered.
There
are some Companies that offer a fixed cost Policy
issued for each new tenancy agreement for around £140
per tenancy.
Portfolio
Insurance
It
can make good sense for Landlords to take out Property
Portfolio INSURANCE
as it can bring both simplicity and the financial
saving of having one insurance policy to cover their
entire portfolio of properties.
While
some Landlords choose INSURANCE to
match the specific demands of their individual properties,
if a larger portfolio is owned it is generally worth
having a look at covering them all under one policy
as it can give large savings.
Portfolio
INSURANCE is based on a number of properties
and is subject to the Condition of Average (under
insurance). This means that each property insured
is subject to Average in that if it is insured for
less than the rebuild value of the property, the amount
payable will be proportionately reduced. It is advisable
to have the properties accurately evaluated by a Chartered
Building Surveyor
to make sure the INSURANCE is for the correct sum.
Also remember that the insurance needs to be for the
rebuild value and not the sale price as it often higher
than the rebuild value, which will make the premium
higher than needed.
Mortgage
Payment Protection Insurance
(MPPI)
MPPI
INSURANCE will cover mortgage payments if
the policy holder becomes unable to work due to an
accident, sickness or with some policies if they are
made unemployed. The policy that covers all three
eventualities is also often called ASU cover. There
are a variety of options and all INSURANCE
has cover restrictions. A pre-existing medical condition,
is likely to exclude a claim for that condition if
it reoccurs. Most policies have an initial exclusion
period of between 30 and 60 days before a claim can
be made and premium payments will continue during
the claim.
Life
Insurance
Life
INSURANCE provides financial protection in
the event of an early death where there are dependents
that rely on the holders earnings. There are three
main types of Life INSURANCE: term
insurance, whole life insurance and endowment insurance.
In
terms of buying a property most borrowers opt for
decreasing term assurance – the sum insured,
normally the balance of the mortgage, reduces by a
fixed amount each year, decreasing to nil at the end
of the term. The premium will normally stay the same
and the policies are used to cover a mortgage or other
loan given that they pay an outstanding balance of
the debt if death occurs. |