If you have bought or otherwise come into property to let, you are effectively running a business in which the principal asset is, of course, the building and your income stream the rents you collect from your tenants.
It is important to establish this essentially commercial aspect of owning let property. This is the key to understanding how and why to let property insurance (or landlord’s insurance or buy to let insurance, as it is also known) differs from the standard form of property insurance which normally protects the property when it is occupied or in continuous use by the owner.
The distinction is very important – not least to insurers, who consider there to be a different order and nature to the risks associated with property that is occupied, compared to one that is in continuous use.
For that reason, if the property is let to tenants, it is essential to have let property or landlord insurance, since other standard forms of property insurance are no longer suitable.
Unless you have let property insurance for the premises you are letting, you are likely to find that any claim for loss or damage is likely to be rejected.
What does it cover?
There are many different types of landlords, so there are many different types of the landlord or let property insurance – a detailed handbook published by the Residential Landlords’ Association (RLA) may make this clearer.
The typical policy, however, is likely to include at least the following key elements:
- as the principal asset of your buy to let business, you need to safeguard the structure and integrity of the building itself;
- building insurance protects your let property against such potentially serious risks as floods, fire, impacts (from vehicles or falling objects such as trees and branches), storm damage, escape of water, vandalism and theft;
- the total building sum insured typically anticipates a worst-case scenario where the property becomes a total loss and needs to be completely rebuilt – the Royal Institute of Chartered Surveyors (RICS) maintains an index of updated reconstruction and reinstatement building costs;
- as the landlord, you are likely to own at least some of the contents (in hallways and other common areas, for example) and you may choose to insure these against theft, loss and damage;
Landlords’ liability insurance
- as the owner of the let property, you have a duty of care to ensure that neither your tenants, nor their visitors, or members of the public suffer an injury or have their own property damaged;
- if they do, you may be faced with a claim for substantial damages – so substantial that it is usual for landlords’ liability insurance to offer at least £1 million of indemnity;
Loss of rental income
- your let property is a business and if it is damaged by a sufficiently severe insured event, the income stream of your business – namely rent – may stop because the property is temporarily uninhabitable;
- most buy to let or landlord insurance policies, therefore, make provision for compensation for loss of rental income in such events.
If you are the landlord of any kind of let property, the relevant insurance is likely to be essential – and the relevant cover is let property insurance.