Buy to let insurance cover for landlords overview - Cheapest buy to let insurance

Buy to let insurance for landlords is an amalgamation of covers compiled by insurers to offer landlords with the necessary and vital mechanism to ensure that their investment is sufficiently protected.

Buy to let insurance is certainly a required insurance for landlords and their properties. From the property-owner who has a single small flat, to the entrepreneur who controls a large portfolio of property, and has invested a great deal of money, a certain amount of income is expected. Landlord insurance protects you against losing your capital investment, and can also help protect the income stream you receive through your tenants paying rent.

The following is a synopsis of the typical insurance covers, which make up a landlords insurance policy.

Property Insurance:  will provide cover against most risks such as flood and fire for the cost or repair or rebuilding. Prepare for the unexpected: risks such as terrorism or subsidence can as a rule be purchased as optional extras for added protection from most insurers.

When considering property insurance it is always imperative to remember that you when you state the value of your property you are actually estimating the cost of rebuilding it should it be totally destroyed (this is what insurance companies call a total loss). Most insurance companies work out a rate to charge the landlord based on the location of the property and then apply it to the amount specified to rebuild the building (which is called the Buildings Sum Insured). It is therefore cheaper to insure a building that is worth less than an expensive building which is as expected.

It is equally important to make sure that you do not underestimate the cost of rebuilding your property. If you have paid a lower premium by underestimating the Buildings Sum Insured, then the insurer will normally only pay your claims up to the proportion of the building that you have insured. For example: If your house is worth £100,000 but you only declare a Buildings Sum Insured of £60,000; should you have a claim of £10,000 then the insurer will only pay you £6,000 as they will deem that you under-insured. It is important not to be caught out by this by being tempted by lower premiums for lower Buildings Sum Insured.

Contents: 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 you can insure are items that you own in the property but which may become damaged such as carpets, sofas, tables, chairs and pictures if you are renting the property as furnished. Many insurers also insure communal contents which will cover contents such as those names above which are situated in communal areas in blocks of flats, or properties with multiple types of tenants.

Landlord Liability: As a landlord you are responsible for the safety of the property that your 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 you 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.

Frequently Asked Questions:

Why can’t I buy normal home insurance for a buy to let property?
By renting a property out to a tenant, you are effectively operating as a business, even if the income is very small. For this reason you must purchase business insurance, of which Landlord Liability is a subset. As a landlord you have legal responsibilities towards your tenants in a way that you do not have for your own home. A landlord insurance policy covers you for this.

Can I insure my tenant’s contents on my landlord insurance policy?
No. You can only insure your own contents on your landlord insurance policy; your tenants must take out their own insurance should they wish to protect their contents. The reason for this goes back to one of the principal rules of insurance, which is that the entity that is being insured must be owned or directly effect the person who is taking out the insurance contract. If this rule is not strictly adhered to, the insurance contract can develop a moral hazard and end up more like speculation/gambling.