landlord insurance

Landlord insurance: What are the top three risks to be aware of?

Property investors operating in the buy-to-let space are strongly advised to get landlord insurance, but there are some key considerations to be aware of.

When you invest in a buy-to-let property, traditional home insurance (buildings and contents) is generally not adequate to cover the risks of renting out a home to tenants. Landlord insurance offers specific protection, giving investors peace of mind.

As well as options to cover the building and its contents, you can also cover accidental damage, loss of rent, liability and sometimes rent guarantee – so if your tenants stop paying, you can recoup the costs.

While landlord insurance isn’t a legal requirement, it is strongly advised as a way of protecting your investment and your income. But what are the common pitfalls? Kevin Meek from Protect My Let has set out three of the most common issues that landlords may face with their insurance.

1. Inadequate landlord insurance

Being underinsured can pose a problem for homeowner insurance as well as landlord insurance if the property were to be completely destroyed, for example. The maximum level of insurance cover you have taken out must be enough to pay for a full reconstruction.

However, as Meek points out, it is something landlords should be particularly aware of in the current climate.

“The economic uncertainty of the last few years has seen inflation rise sharply in the construction industry,” he says.

“Supply chain issues and labour shortages have compounded the situation, meaning it costs a lot more to rebuild a property now than it did even just a year ago ­– and leaving many landlords underinsured.”

It is important to update your landlord insurance policy if you make any major changes to the property that could affect its value, to ensure you have enough cover.

2. Costs you hadn’t factored in

As a landlord, it is always advisable to have backup funds to pay for unexpected costs as they arise – and when letting out a property, these can be more frequent than for a standard home.

Meek therefore advises that your landlord insurance covers some of these eventualities, such as replacing a broken boiler, dealing with a water leak, or combating an infestation in your buy-to-let. There could even be a situation where you have to pay to temporarily rehome your tenants.

“The current economic turmoil is squeezing many household finances, increasing the risk of late or missed rent payments, but evictions can take up to a year to resolve and cost thousands of pounds in legal fees,” he adds.

Comprehensive landlord insurance can give you additional peace of mind to know that you can cover all unexpected costs.

3. Covering void periods

Void periods – where a property sits empty between tenancies – are almost inevitable if you operate a buy-to-let property for a number of years, particularly if you let to students who vacate for the summer.

According to Meek, insurers often include a clause that restricts your landlord insurance if a property is empty for 30 days, so it is worth looking into this if your rental home will be unoccupied for a period of time.

Minimising void periods is a big focus for most buy-to-let landlords, as the longer a home is empty, the more rental yields are lost. In the current climate, the rental market is in high demand in many areas, so a lot of landlords are finding their homes being snapped up quickly.

Finding the best cover

If you get the optimum landlord insurance for your requirements, you are likely to save many headaches in the future. Meek advises assessing the property’s needs, getting a professional valuation, and considering all the unexpected costs that might crop up as a first step.

You can also use a broker, who can offer additional guidance and advice. Meek adds: “Good brokers will also have a good relationship with a range of insurance providers so they can negotiate on your behalf to always stay competitive on price – often finding deals that aren’t available directly.”

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