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Landlord Buildings Insurance - An Overview
Buildings insurance is a condition of mortgage lenders, so, in the event of a disaster, the property can be repaired / rebuilt. With no buildings insurance, not only the property will be damaged or destroyed, but also you’ll still owe the lender the value of the mortgage. Many lenders have experienced such a scenario, and request proof that the property is insured. The lender will require insurance for the rebuild cost of the property, which will be noted in the mortgage survey. This will be considerably less than the market value of the property. Most insurers cover the rebuild cost, although some will cover the market value. Check the terms of the policy.
Extension of Cover
Most buildings policies have valuable extensions of cover for a small additional premium:
Alternative Accommodation : If the property is so badly damaged that it is uninhabitable, until repairs are completed, your policy will help to meet the reasonable cost of alternative tenants’ accommodation, up to a predetermined limit.
Liability : If you are responsible for injury to a third party, or damage to their property, personal liability will pay any damages claim and legal expenses. There is usually an upper limit of £2 million.
Underground Pipes and Cables : Gas, electricity, oil and water supplies, as well as sewage pipes, are insured against accidental damage. They are not insured against wear and tear.
Glass : Doors, windows and skylights are covered against breakage, along with baths, washbasins and WCs.
Emergency Repairs : If your property is damaged, do what you can to stop the damage getting worse. Many policies cover the cost of temporary work. Some insurers provide emergency telephone numbers, which will help you to find a competent tradesman, who can carry out emergency repair work.
Choosing a Buildings Insurance Policy Provider
A good agent or broker should be able to help you decide what types of coverage you need. They will also be able to recommend the limits of liability.
Get feedback from industry friends and associates. The best referrals come from others in the same business, who already have the correct specialized insurance cover. Landlord associations, magazines and online services can provide further information.
While cost of coverage is important, the premium should not be a priority in choosing insurance provider. Premiums can be paid by monthly direct debit, helping to spread the cost. Adequate cover must be the prime concern. Consider the scope of the expertise of the insurance company.
Requirements from mortgage or finance companies
Solicitor and mortgage lenders can provide help in finding appropriate insurance. Mortgage lenders usually have their own buildings insurance products. Unless this is included in your mortgage package, shop around to find the best deal.
If the property is not mortgaged, calculation of the insurable sum will be required. The Association of British Insurers produce an excellent guide to rebuilding costs based on the property size.
Common Exclusions
Some losses are not covered, or are only partially reimbursable. The policyholder has to meet some of the cost of each claim, known as the "excess". This serves to reduce policy premiums and deter trivial claims. Aim for an excess in the region of £100.
Damage caused by subsidence is usually subject to a higher excess, typically around £1,000.
Common exclusions are losses incurred as a result of:
War.
Frost damage.
Sonic bangs.
Radioactive contamination from nuclear fuel or waste.
Acts of terrorism.
These can be covered by paying an additional premium.
Small Print
Read the "small print" carefully, ensuring you understand the level of cover, and the circumstances in which a claim can be made.
The policy document will contain a list of perils covered, together with a list of the variations and exclusions that apply:
1. Earthquake, Explosion, Fire, Smoke, Lightning - excluding damage caused over a period.
2. Aircraft and articles or parts dropped from them.
3. Impact by animals, vehicles or falling trees or branches - excludes damage caused by felling or lopping trees.
4. Theft or attempted theft - excludes losses that happen if the property left unoccupied for more than 30 days, or theft perpetrated by a tenant.
5. Burst Pipes – (the cover of pipes damaged by freezing varies form policy to policy).
6. Storm or Flood - excludes damage by frost and damage by storm to fences, gates and hedges.
7. Riot, Civil Commotion, Strikes, Political Disturbances or Labour Unrest.
8. Oil Leakage.
9. TV aerials; mast breakage or collapse, satellite dishes and radio receiving aerials.
Differences from Conventional Home Insurance
Problems with regular buildings insurance policies where buy-to-let properties are concerned are that the property may not be covered if it is unoccupied for more than 30 days; problematic during any extended void periods. Liability cover for any injuries that take place at the property may not be enough. Employees injured at the property are also unlikely to be covered.
Conclusion
As there are so many limitations of regular home insurance where the requirements of landlords are concerned, special landlord's or buy-to-let insurance policies are likely to provide better cover and lower the risk of being unable to claim when damage to the property or its contents occurs. The amount of buy-to-let properties has increased substantially in recent years, which means there are a growing number of landlord's insurance policies available, as insurers aim to cater for this market. Important features are included in these policies, such as increased cover for owners' liability and loss of rent, should damage to the property mean it must stay empty. Vacant periods of up to 120 days are permitted. However, there may be restrictions on letting to DSS tenants, asylum seekers or students.
If you would like one of Global Financial Limited's independent mortgage brokers to supply you with a no obligation quotation then simply fill in the form and a broker will phone you to discuss the finer points as you would not want to sign up to a mortgage that is not quite what you wanted.
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