Investment property and landlord’s insurance policies are, for the most part, the same as a regular home insurance policy. Generally, they are going to cover you for the structure of the building, the roof, walls and windows. It should also include permanent fixtures such as fitted kitchens and bathrooms and should also cover the building for fire, storm, flood, subsidence, burst pipes, theft and falling trees, amongst other things.
However, with a landlord’s or property investor’s policy it is accepted that the property will be rented out, that you, the owner, will not be there living in it, caring for it 24 hours a day and the policy premium takes that into account.
What exactly is property investors or landlord’s insurance?
Typically, the main difference in a specialist investment/landlord’s insurance policy is that it will cover you for loss of rental income and alternative accommodation cover. Let me explain.
- Loss of rental income cover: As a landlord or investment property owner you receive rent from the tenants who occupy your property. If the property should, as a worst case scenario, burn to the ground, you are going to suffer a significant loss of rental income while the building is being rebuilt. Your landlord’s or property investor’s insurance policy will typically pay your rental income for anywhere between 24 to 36 months while the property is being rebuilt.
- Alternative accommodation cover: The second aspect of the policy is the ‘alternative accommodation’ cover. Your tenants, who have now been made home, or office, less will be rehoused at the insurer’s expense, while the original property is rebuilt, ensuring your tenants keep faith with you and have somewhere to live and work until they can return to your property.
Neither of these clauses are in a regular home and contents insurance policy so it is crucial that you declare a rental property as just that.
What happens if you lie and use a regular, potentially cheaper home insurance policy?
Firstly, this is a ‘material fact’ and you are required to disclose the truth to the insurer, if you don’t then your policy will be null and void. Apart from that, why take the risk? Your livelihood may depend on the income rental from this property, for potentially an extra £100 a year, you may lose out on the two main benefits of having your rental income still paid and a temporary replacement home for your tenants. Also, if the insurers find out you were renting the property out whilst using a regular home insurance policy, then that policy will be null and void too.
If you have questions about specialised insurance for landlords and property portfolios contact our partner Partners&.
What can I do to reduce my premium?
There are quite a few things you can do to reduce the premium of your rental or investment property:
1. Choose the right tenant: Interestingly, the type of tenant you take on makes quite a big difference to your premium. The insurer will be much happier if you have long-term tenants, say a professional family, as opposed to a student let or any much shorter-term rentals.
2. Choose the right commercial tenant: Similarly, if you rent out your commercial premises to a book binding business, it will carry less risk than if you rent it to a fireworks company.
3. Ensure you have an up-to-date valuation: Giving the correct ‘rebuild’ valuation can make a difference to your premium too. This isn’t the same as an estate agent’s ‘resale’ value which of course includes the land the property stands on. Your rebuild value may be much less – it purely means how much to rebuild the property in bricks and mortar.
4. Show evidence of good risk management: The insurer will be pleased to see evidential proof of good risk management, such as that you regularly have roofs cleaned and inspected. Insurers offer discounts to clients who can demonstrate good housekeeping standards.
5. Install safety features: Fire alarms, fire extinguishers, smoke detectors, sprinkler systems and so on all contribute to reducing the price of your premium.
6. Consider investing in a newer property: The age of the property you are looking to insure will also play a part. For instance, if you are taking an old, listed mansion and turning it into apartments or a hotel it is going to cost much more to insure this property than a property of the same size that has been recently built to the very latest standards. In short, it is much less likely to burn down, something insurers love!
Do I get a discount from the insurer if I own a portfolio of properties?
Yes, you absolutely would do but with the caveat that they should be spread out across the UK. Put your insurer’s hat on again and look at it from their risk point of view. Say you own five terraced houses, all in a row, the chances of something bad happening to one or all of them (natural flood, fire, storm, gas explosion) is much greater than if your five properties were spread across the United Kingdom. So yes, discounts are very much available but only in specific circumstances.
What should I make sure is in my landlord’s or investor’s property insurance policy?
As I said before, loss of rental income and alternative accommodation are an absolute must and what sets this kind of policy apart from a regular house insurance policy. Another few things you may like to see are:
- Length of time to rebuild – any policy that only offers you two years to rebuild instead of four should be avoided. Although it may sound a long time, two years is not realistically long enough to rebuild some properties.
- Cover for outhouses and external buildings – often with rental properties, particularly large properties split up into flats, there will also be garaging, swimming pool, tennis courts etc. Make sure these are listed on the policy.
What is the benefit of coming to an insurance adviser like Partners&?
I would recommend anyone who has decided to become a landlord or buy property to rent out as an investment, to always go through an experienced insurance adviser like Partners&. We offer a uniquely personal service which comes into its own at many touch points along the client’s journey. When looking to insure the property we can meet you onsite with the insurer to do an in-person inspection. If a large accident happens, I’ll be on site within 24 hours to assess the damage (usually the same day but we say 24 hours in case you are in the far reaches of Scotland and the weather and plane timetables are against us!).
From there, we’ll personally handle your claim, meaning you can get on with life and work, leaving the paperwork up to us. As mentioned before, we can negotiate discounts for large property portfolios and have an eco-system of trusted partners to call on if you need further help. Finally, you can rest assured that your policy with us won’t cost any more than if you had purchased it online, so you are getting our help and experience at no extra cost.
By Laura Chown, Insurance adviser, Partners&
Partners& challenge the status quo by delivering insurance advice that makes a difference. Combining technical knowledge with service and intelligent use of technology, they offer clients the confidence and peace of mind that you are protected so with tailored recommendations that are right for you.