The owner of any kind of property is likely to place considerable importance on insurance as the most effective way of protecting their investment against loss or damage.
Any home owner, for example, is likely to turn to one of the many variations of home building and contents insurance to safeguard the property and its contents.
But landlords of residential buy to let or commercial property also need a specialist form of insurance cover – and that takes the shape of landlord insurance.
Why is it specialist insurance?
There is a critical difference between a home that is occupied by its owner and one that is occupied by tenants. The former is the owner’s main residence, but the latter is effectively a business asset, on which the income stream for the business depends and an asset which is expected to appreciate in capital value over time.
This is the basis on which insurers distinguish between an owner occupied home and one which is let to tenants as part of a buy to let business. A similar distinction is made by mortgage lenders when considering applications from would-be home owners and buy to let investors, explains the Council of Mortgage Lenders.
If you are a landlord, the distinction is especially important since any standard home insurance cover you might have arranged is likely to be invalidated – and claims therefore rejected – if the property is in fact occupied by tenants.
What does landlord insurance cover?
So, what are the principal risks to your buy to let business which landlord insurance is specially designed to cover?
The building and its contents
- common to any property insurance is the protection of the structure and fabric of the building and any contents you own against potentially serious threats from fire, storm damage, impacts, floods, theft and vandalism;
- if you are the landlord of a furnished let, the contents may be worth a considerable amount – with sufficient landlord or buy to let insurance providing the wherewithal to repair or replace damaged items;
- some – but by no means all – landlord insurance policies also extend cover to malicious damage caused by tenants;
Landlord liability insurance
- as the landlord, you have a general duty of care towards your tenants, visitors to your property, neighbours and members of the public and this means you must take every reasonable precaution to prevent anyone being injured or having their own property damaged
- if you do something, or fail to do something which results in such injury or damage, you may be held in breach of that duty of care and ordered to pay substantial compensation to the injured party or parties;
- these kinds of claims may be very substantial and to cover your risks, therefore, it is typical for landlord insurance, to include indemnity of at least £1 million;
Loss of rental income
- your buy to let property is your business and you rely upon the income generated by the rent you receive from tenants;
- following any major insured event, however, the accommodation may no longer be suitable for habitation and you lose that rental income;
- landlord insurance typically provides compensation for that financial loss – up to whatever limits are available under your particular policy.
In short, landlord insurance is an important safeguard for any landlord of residential commercial let property. It is designed to afford protection not just for the building and its contents, but your buy to let business itself.
