Choosing the Correct Landlord Insurance Policy
Many landlords and tenants are unaware of the different types of insurance policy they should take out before committing to a tenancy agreement. A common failure by landlords is to simply assume that everything will be covered within a basic household insurance package, but this is emphatically not the case. To avoid facing liability for loss of rental income and accidental or otherwise damage to the property, be prepared and take out comprehensive landlord insurance.
As well as full buildings and contents cover, landlords should ensure that they have the following covered in a landlord insurance policy: firstly, emergency assistance cover. This protects against events such as lost keys, electricity failures and emergency plumbing repairs, and should provide an emergency helpline as well as parts and labour cover. However, this is not to be used as a full repair service; ongoing maintenance should also be drawn into the contract. If as a landlord you have opted for a management service via your letting agency or estate agent, this form of cover may not be necessary as it should be part of the management service, but it is always worth checking the details. Note also that tenants should have their own contents cover for their possessions, as these will not be covered by landlord insurance.
Legal expenses are an area that should also be covered within a good landlord insurance policy. If rent is unpaid for whatever reason, be that your tenant losing his or her job, or suffering from illness or having an accident, then the situation may have to be resolved in court. Having a legal expense policy within your insurance is an inexpensive way of covering such legal costs, which typically can be between £800 and £1,000 per hearing.
Finally, consider taking out rent guarantee cover as part of your landlord insurance policy. This is invaluable if you are relying on rental payments to cover a mortgage or expenses and will guarantee some of your rental income regardless of the circumstances of the tenants. Typically, a policy will guarantee rental income for a six to 12-month period, although additional guarantees can be taken out. Expect to pay between three and four per cent of your annual rental income – a small price to pay for peace of mind and insurance against repossession.