There are various risks associated with the letting of residential property that can keep a potential landlord awake at night. One main area of concern for almost any landlord is, ‘What will happen if the tenants can’t/won’t pay the rent? Can I protect my rent, and what about the legal costs involved in evicting unwanted tenants? This is where Rent Protection or Rent Guarantee Insurance comes in.
Rent Guarantee Insurance: Protecting your rent and more
A number of companies offer Rent Guarantee Schemes that also provide for Legal Expenses Insurance in the unfortunate event that you need to evict the tenants or get back your unpaid rent etc.
If you are letting privately, rather than using an expensive letting agency, it’s really worth considering this type of insurance because there is a greater tendency for ‘rogue tenants’ to avoid letting agent and rent direct from landlords. This is mainly because they know that letting agents operate fairly stringent vetting procedures that private landlords sometime dispense with.
Remember that is a requirement of Rental Guarantee and Legal Expenses Insurance policies that the tenants are thoroughly credit checked by an approved agency. And this requirement of itself can be a great deterrent to dodgy tenants!
The way Landlord Rent Guarantee policies usually work is the landlord pays a premium to cover either six or 12 months’ rent, before the proposed tenant(s) moves in. If, during the period of cover, the tenant stops paying rent then the landlord has to initially follow certain protocols such as issuing a written demand for the rent and if that proves unsuccessful they can then contact the insurer and they will be paid the missing rent up to a maximum agreed amount or until the offending tenant is evicted, whichever is the sooner. Usually the first month is not paid for as it is assumed that the standard security deposit will cover this.
Sometimes there is the option simply to by insurance to cover yourself for legal expenses alone – which will obviously be cheaper still.
However, it is always a requirement of such policies that the prospective tenants are appropriately referenced and supply correct identification before any such policy is valid. Like all insurance policies, it’s important that you as landlord ensure you comply closely with these requirements in order that the policy is valid in the event of a claim.
Landlord Buildings Insurance: Protecting the fabric of your property
It’s essential that the fabric of your property, its very structure, is fully covered by suitable Landlord Buildings Insurance. Bear in mind that landlord insurance premiums will usually be a little more expensive than for ordinary owner-occupation. This is because it’s assumed that a tenant is unlikely to take quite as much care of your property as you the owner would if you yourself were occupying it. Most policies provide for all kinds of tenants, including professional people, self-employed, students, DSS and even asylum seekers.
Buildings Insurance is there to cover the damage or even complete destruction of your property by various perils such as fire, flood, storms, subsidence, damage to underground drains, criminal damage etc. It only covers damage to actual ‘structural’ items. For example, if a burglar forces their way in and damages the front door and locks in the process and makes off with your possessions then under such a policy you would only be covered for the damage to the door – not your possessions.
If you own a flat in a block then it’s almost certain that it’s covered for buildings insurance by a block policy and you are probably billed for that along with your annual service charge. Therefore it’s quite unnecessary and indeed wrong to purchase a separate buildings insurance policy for your individual flat.
Making sure you’re not being overcharged for block buildings insurance
As I just mentioned, almost always if you own a flat, you will be paying buildings insurance to the management company along with your service charge. If you are lucky enough to be a leaseholder in a block where you all either own a share of the freehold or have the right to elect directors and manage your own block, you should ensure that the management company is getting proper value for money with regards to buildings insurance.
It is always worth getting a quote, if not each year then at least every two years or so.
Landlord Contents Insurance
As the name implies, this insurance is there simply to cover damage to or theft from your property whilst tenants are in occupation, and to a certain extent whilst the property is unoccupied. Certainly if you are letting a property furnished it is a good idea to insure your own contents because the landlord’s security deposit may not be enough to cover serious damage by the tenants or other risks.
Covering yourself against claims by the public, tenants or employees
Usually both Landlord Buildings Insurance and Landlord Contents Insurance policies included insurance against either claims by the public or your tenants or possibly tradesmen, in the event that they should suffer any kind of injury whilst on your premises and believe that you have in some way been negligent. This kind of liability insurance is usually separated as either Employer’s Liability Insurance, to protect you against claims from people you employ in your property, and Public Liability Insurance to cover against claims against you by tenants or members of the public with respect to your property.
Very often, landlords choose to combine the above two policies and it can then be known by the generic term ‘Landlords’ Household Insurance’.
In conclusion, given the increasingly litigious society in which we live and the various risks associated with being a landlord, I would say that any or all of the above forms of insurance are strongly advisable, and buildings insurance is not only essential but always a legal requirement in blocks of flats, for obvious reasons.
LandlordsandLetting offer competitive instant online quotes for Landlord Buildings Insurance, Landlord Contents Insurance and of course, Rent Guarantee & Legal Protection.
