To find the best Landlord Insurance your going to have to consider a few points, landlord insurance cover is different from normal residential cover you might have on your own residential building, the house or flat you live in, when you rent out your house or flat you need landlord insurance your residential insurance will not cover you and you are effectively uninsured.
Your residential insurance will not pay out in the event of a claim as residential insurance polices specifically state that the insurance is for you and your family not for a house rented out to a tenant, so if you try to make a claim on your normal home insurance and the claim will be refused.
There Are Two Types Of Landlord Insurance, Residential Landlord Insurance And Commercial Property Landlord Insurance
There are two types of landlord insurance, residential landlord insurance and commercial property landlord insurance, let me explain the difference, if you rent your home to a tenant either your own home or a property you bought specifically for buy to let then you need residential landlord insurance.
If you bought a property that is a business premises for example a shop then your need commercial property insurance as a landlord as the property is being used by a business not by a residential tenant.
If your property, either your own property that you live in or a property you wish to rent out or a business premises you wish to rent out and have no mortgage on the property then it is entirely up to you if you want to buy insurance or not, you would be leaving yourself open to significant risk of damage to your properties, but if they are not mortgaged then there is no requirement to have insurance.
Buy To Let Mortgage
Now if the property has a buy to let mortgage on it or even a residential mortgage then the mortgage company will specify that you must have the property insured, the reason for this is that should damage to the property result from flood or fire or tenant damage for example then the mortgage company will want you to pay to put that damage right and without insurance there is a good chance that you would not be able to put the building back to the condition before damage using your own money.
Remember until the mortgage is paid off itís the mortgage company that own the building and not you and in the terms of the mortgage is a requirement that the policy holder maintain the property in a good standing (so the mortgages companies investment does not diminish).
Multiple Properties On One Insurance Policy
Most buy to let insurance polices will let you insure more than one property on the same insurance policy, usually up to a maximum of ten properties on the same insurance policy, you donít have to have ten properties when you take out the insurance as you can add more properties to the insurance as you buy them or as the landlord insurance on the other properties expires.
You should choose contents cover in your insurance policy, this covers your own contents if the building is rented as furnished or semi-furnished as well as the tenants (the person you rent the building too) possessions, if for example the radiator leaks and ruins your tenants clothes then you can claim on your landlord insurance for the ruined clothes, there will be a maximum value that you can claim and you might be asked to produce receipts (get your tenant to give you the receipts) which you can photograph with your mobile phone and email to the insurance company.
If you have one or more properties that you rent out to another person or family to live in then you are a residential landlord, if your rent out one or more properties to be used as business premises then you are a commercial landlord.
Multiple Occupation Dwelling's Need Their Own Insurance
Now if you rent out individual rooms in your house to different people rather than the whole house to one family then your property is classed as a multiple occupation dwelling and your going to need insurance that covers multiple occupation as well as apply to the council for permission to rent the house as multiple occupation, without council approval you will be fined when the council finds out you are renting out a house for multiple occupation without their approval and the council will find out because your neighbours or the tenants themselves are very likely to report you once more cars appear in the street and the neighbours canít park for example.
Whilst landlord insurance (whether business premisses or residential premises) will cover for fire, flood, burglary, damage from trees and high winds etc. it might not cover you (unless you select these optional extras) for tenant damage, if your tenant decides to vandalise your house or just does not take good care of it, spilling things on the carpets, writing on the walls, breaking appliances and fittings etc., with tenant insurance your be able to claim on your insurance policy for tenant damage, without this option included on your insurance your have to pay the tenant damage yourself in order to get your home repaired for the next tenant.
You could of course take the tenant to the small claims court, assuming they have left a forwarding address and you can find them.
Your need to have your tenants sign a legal document a tenancy agreement stating what the tenant agrees to do (pay rent each month and keep the house in good order) and what you will do each month, collect the rent, repair appliances and the building in a timely manner.
Legal Document Support
Some landlord insurance policies come with legal document support where the insurance company will provide you with tenancy agreements you can give to your tenants for signing, whatís great about this is the tenancy agreement will be watertight and just the agreement that the insurance company would want you to use because they wrote it themselves.
This saves you having to go to your own solicitors and have them draw up a separate tenancy agreement just for you. If your tenants have pets then recommend they get Pet Insurance.
Outside Buildings Cover
If you have outside buildings like sheds, greenhouses and outside storage units then you should make sure that your insurance policy includes buildings cover and contents cover for those buildings, so if for example someone broke into your shed and stole your tenants bicycle, the tenant might claim that your security arrangements where not adequate and want you to pay for the cost of a new bicycle, assuming those arrangements where adequate and you have contents insurance your insurance company will pay out when you make a claim.
Accidental damage cover is not included as standard on landlord insurance but is one of the optional extras, say for example your tenant left the cooker on and this caused a fire, this is accidental damage and you wouldnít want to be making the repairs without being able to claim on your insurance which you would have to do if you did not include accidental damage on your policy.
You might need specialist landlord insurance if you have a house of multiple occupation, but generally even these cases are as simple as a tick box on an online insurance form, and remember you pay nothing to get several quotes so shop around and get the best deal.
To save you the worry as a new landlord, get what insurance companies call comprehensive cover which includes all their options like contents insurance, accidental damage insurance, multiple occupation insurance etc., as a new landlord you donít really know what you will need as your inexperienced, go with comprehensive and then in later years when your more experienced you can customise your insurance quote to what experience tells you is right for you, insurance is all about managing risk, how much risk (expense) to you want to have when your renting your house out to strangers.
Of course get references from your tenants, but realise that you are renting your home out to your tenants not the former landlord, watertight insurance is much more reliable than relying on the written reference of a landlord you have never met.
Landlord Insurance Can Also Include Loss Of Rental Income
Landlord insurance can also include loss of rental income, if you have a mortgage on the property, then the tenant paying their rent each week or month means that you can use this money to pay your mortgage (thatís how most buy to let property empires have been built), but if the tenant doesnít pay you then you need to have the monthly mortgage repayments in your own bank account in order to pay the mortgage, but if you have rental income protection your insurance company will be making the mortgage repayments for you until your tenant starts to pay again.
You can get insurance not only for your tenant failing to pay their rent but also for you being unable to rent your property, say a tenant moves out at short notice or you have to evict a tenant, your immediately unable to pay your mortgage if the tenants rent is how you would finance your mortgage payments, with rental income protection the insurance company will pay the rent for you until you can find a new tenant.
With loss of rent cover insurance there are obviously certain safeguards to make sure the policy is not abused and to encourage you to rent out your building rather than rely on the insurance company paying the rent for you and therefore the length of time the insurance company will pay the rent and proof (by way of advertising) that you have tried to rent your property is usually required.
Your letting agent if your using one to find tenants for your property can advise you of landlord insurance and your probably find them very keen to recommend a particular insurance company to you because the letting agent will be receiving a commission from the insurance company for every landlord insurance policy sold.
You have spent a considerable amount of money in buying your property to rent out, this might be your lifeís savings and your using your nest egg to buy property in order to give you a full time income or you might be building a property portfolio, either way to not insure your property means you as the property owner are liable for the repairs and upkeep, with insurance you can claim all or most of the cost of these repairs.
First Time Landlords Should Consider Rental Protection Insurance
First time landlords should consider rental protection insurance because as a first time landlord you might not be familiar with how to get tenants to rent your property and you donít want a lack of tenants to mean that you canít pay your mortgage.
Liability Insurance Is Another Critical Part Of Landlord Insurance
Liability insurance is another critical part of landlord insurance, the reason for including this is best explained with an example, say for instance that your gas boiler explodes and the neighbouring property known as a third party take you to caught for damage to their property, without liability insurance your have to pay the cost of repairs to their property as well as your own.
Typically landlord insurance policies will offer up to ten million pounds of liability insurance cover, meaning that money you might have to pay someone else must not exceed ten million which would be normally the case for most residential streets, of course if your rental property is surrounded by multimillion pound properties then you might want to consider increasing the amount of liability cover.
When you let your home realise that itís no longer your home in the sense that your tenants are unlikely to respect your home as much as you do, for example you might be really proud of that expensive kitchen or bathroom that you had put in after many years of living in the property yourself, but your tenant might not be and is just as likely to burn your counter tops or smash the mirror in your bathroom and without landlord insurance you would have to pay all these expenses yourself.
Unoccupied Property Insurance
If you have a buy to let property that is unoccupied for an extended period of time then you can take out unoccupied property insurance, your landlord insurance will probably be void and would not pay out in the event of a claim if you leave the property empty, you need specialist insurance for unoccupied properties because there is a greater risk of fire or flood or some other damage going undetected for a period of time and resulting in greater damage.