As you know, it takes a considerable amount of money investment in your property to make it as attractive as possible to any prospective tenants. Thus, it should be your number one priority to protect your investment before letting it out to any tenants.
Landlord insurance serves to protect landlords during circumstances where they are prevented from using their property to earn an income.
You never know, there can be some circumstances that lead to legal disputes between landlord and tenants. A right landlord insurance policy should cover you for any legal expenses.
If your property is damaged by the tenants to the point that it is inhabitable and cannot be rented out to the next tenants, then the policy should cover the costs to repair and compensate you for the loss in rent collected during the renovation of your property. Without a right cover it is such a nightmare, you can imagine.
It is advisable by the insurance companies that while buying landlord insurance you as a landlord should not only consider possible would be property damage but also consider libel, slander and discrimination.
There are mainly two types of policies:
a. Comprehensive policy: It covers for all types of situations except those specifically excluded – you must read the final print of the policy.
b. Peril policy: In contrast, this type of policy generally covers fewer types of damages and lists only those losses that will be covered – again read the final print of the policy.
Now let us understand the 3 main features of the commonly known asbuy to let insurance:
1. Landlords Buildings Insurance - This insures the structure itself and will cover the cost of rebuilding your property in the event of total loss. It is worth checking the terms and conditions of any policy to make sure what disasters you are covered against, for example flood or fire damage.
2. Landlords Contents Insurance - Important for all landlords but especially those that are renting their property out part or fully furnished. This will cover the cost to replace/repair items such as furniture, carpets, televisions and any other item you will be leaving in the property.
3. Landlords Liability Insurance – it is advisable to safeguard yourself as a landlord should there happens any personal injury claim raised by the tenants for any personal injury to them or to their visitor at your property. Personal injury claims can easily reach up to £100,000 per claim and this will protect you in the event.
Because of the variety of coverage available, landlords are often advised to carefully consider different options before buying an insurance policy. Like all contracts, the precise language of the insurance coverage must be carefully reviewed to understand precisely what is and is not covered. Coverage may be limited to damage of the interior or exterior of the property.
In addition to the above features you can also add the following features to protect yourself from any of the other perils.
- Rent Guarantee Insurance –In the event of missing rental incomes because of some untrustworthy tenants or empty tenancy period, this feature will cover the cost of your rental income.
- Legal Expenses Cover – In the unlikely event of any dispute between tenants and landlords ending up as legal issues, this feature will cover those expensive legal fees. Taking a tenant to court can usually cost upwards of £800 not to mention the number of month’s rental income lost. Looking at the number of documented disputes over the years, you cannot simply ignore this event, can you!
Landlord insurance generally offers two methods through which property losses can be settled:
a. Actual cash value:Landlords generally pay a lower premium for actual cash value settlement, since they will receive compensation only after deprecation is subtracted from the current value of the property.
b. Replacement value:With replacement value settlement, compensation will cover the necessary costs of replacing the damaged property without considering any deprecation. Property, however, will have to be replaced in order to qualify for this settlement. If it is not replaced, settlement, by default, will likely be actual cash value.
In addition to choosing the actual cash value settlement method, another option for reducing the premium for landlord insurance is to increase the deductible. The deductible is the amount of money the policy holder himself will pay to recover a loss. Higher deductibles can also result in discounts.
Because landlord insurance covers only the property and the rights of the landlord, tenants can greatly benefit from renters’ insurance. Damages to personal belongings or another person’s property within a tenant’s residence become the responsibility of the tenant. Renters’ insurance will provide liability coverage and, in some cases, it could also cover pertinent legal expenses. Renters’ insurance, similar to that offered to landlords, has a variety of options for coverage.