Landlord and Tenant Insurance
Although landlords are not required by law to insure their properties, the overwhelming majority of landlords do opt for the financial protection and peace of mind that insurance offers.
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Standard home insurance is not appropriate for rented properties; it is necessary to select cover designed specifically for tenanted residential property. Landlords' insurance policies can take various forms, outlined below:
Landlords Building Insurance
Buildings insurance covers the structure of the building for loss and damage caused by fire, storms, floods, lightning, explosion, impact, smoke, subsidence, burst pipes, malicious damage and theft. All mortgage lenders require borrowers to have building insurance for their properties.
Different policies will offer different levels of cover and have different exclusions, so it is advisable to read the small print carefully before buying a policy.
The value covered is the cost of re-building the property, and not the market value. As a result, if a property is completely destroyed (e.g. by fire), the landlord stands to lose a great deal.
It is therefore essential to ensure that at the time of arranging the insurance policy, the insurance company does not under-estimate the cost of rebuilding. To avoid this, a landlord may employ a qualified surveyor to calculate the rebuild cost of the property.
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Landlords Content Insurance
Contents insurance covers the contents of the property, except for those items that belong to the tenants, who should arrange separate tenants' insurance for their property.
Contents insurance may be limited cover or full cover. Landlords of a part-furnished properties generally opt for limited cover, which may be limited to around £5,000.
Landlords of fully-furnished properties often opt for full cover, which can offer high enough levels to cover to replacement of the home contents on a new-for-old basis.
Contents Insurance for landlords can include a public liability provision. This covers a landlord in the event of a personal injury claim which results from an accident or injury caused by defective appliances and fittings, loose carpets and so on.
Landlords' contents insurance does not cover the personal possessions of tenants.
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Rent Guarantee Insurance
Most insurers offer policies that cover landlords for financial losses when tenants abscond without paying rent. This is a popular option for landlords who have buy-to-let mortgages, and rely on the rental income to cover the mortgage repayments.
These policies may be calculated according to a fixed premium, or as a percentage of the annual rent. They usually guarantee the rent for a fixed period, e.g. 6 or 12 months.
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Choosing a Landlords Insurance Policy
Many landlords find appropriate cover at competitive rates by choosing one of the insurance policies offered via their landlords' associations. There are also a few insurance companies who specialise in providing landlords' insurance to private residential landlords. Independent insurance brokers can also be a valuable resource.
It is advisable to get a few quotes, and then compare not only the cost of the premiums but the elements of cover that each provides. Exclusions can vary; for example, some policies carry exclusions for certain kinds of tenants, such as students, smokers, recipients of Housing Benefit, and asylum seekers.
If you, as the tenant, wish to insure your personal possessions against damage, loss, and theft, you will need to arrange your own Tenants' Contents Insurance.
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This is not compulsory; the issue of whether or not to insure your possessions is a matter of personal choice.
Choosing a Landlord Insurance Policy
There is great variation in the tenants insurance available, and it is necessary to shop around to find a competitive option that is suitable to your particular situation.
For example, tenants of HMOs (Houses of Multiple Occupation) will find that many insurance companies do not offer policies that would cover them against theft, because of the communal nature of the property. However, there are a few insurers that specialise in providing cover for HMO tenants.
Student organisations, such as the NUS, can give advice on insurance companies that provide insurance that is suitable for students.
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