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Landlord Contents Insurance - An Overview
There are five main types of cover, depending on circumstances:
1. Buildings only cover - with or without accidental damage
2. Buildings with a minimal contents cover for fixtures and fittings
3. Buildings and contents cover
4. Contents cover only
5. Tenants cover
The level of buildings cover needed depends on the rebuilding cost of the rental property. Most insurance companies index-link the policy, to make sure that the reinstatement value is maintained in subsequent years.
An injury claim from a tenant, visitor or member of the public is potentially the most serious event that could befall a landlord. Ensure adequate insurance cover for any personal liability.
Also ensure sure that the insurance policy includes employers' liability cover. If engaging anyone to do work, it is likely the landlord will be regarded as their employer, in the event of them being injured whilst working on the property. Employers' liability insurance for is compulsory by law, so if deemed to have employed someone, a criminal prosecution for not being properly insured is likely.
Requirements for Contents Insurance
Landlord property insurance has two elements. The bulk of any premium relates to insuring the structure of the building. Many landlords let property part furnished, with floor coverings, curtains / blinds, fixtures and fittings and "white goods" in the kitchen.
Items such as furniture are not classed as fixtures and fittings and will need separate cover. Policies will normally replace items on a 'new for old' basis. Note that there is normally a clause in the landlord insurance policy in which states that a loss will only be covered if there has been 'forcible or violent entry or exit'. Therefore, a landlord insurance policy will only protect against damage by the tenants and not property theft. Thus, an adequate tenancy deposit is vital. Check that the landlord insurance policy has some provision for cover against accidental breakage of sanitary fittings and fixed glass, such as windows, as these are one of the most common areas of damage.
Don't be tempted to under-insure. This may save a minimal amount on the insurance premium. However, if disaster strikes, it may cost thousands of pounds.
Check the level of insurance excess. This is the amount the landlord is required to pay. It controls the viability of small claims. Generally, the larger the excess, the cheaper the premium. However, landlords should avoid going for too high an excess, as this will effectively preclude making a claim for many of the small more numerous items. An excess of around £100 is ideal.
Key Considerations on Selecting an Insurance Provider
There is a huge range of landlord insurance brokers offering buy-to-let insurance. There is not a huge difference between the landlord insurance cover offered. Only three or four landlord insurance companies underwrite the insurance policies. The main differences come in the form of price and quality of service.
The Internet allows insurers to sell the same product through different channels, at often markedly different prices. They invariably catch out inexperienced consumers.
Cover
Ensure cover is adequate for all eventualities.
Cost
The price will depend on factors such as:
1. Type and level of cover.
2. Age.
3. The postcode area of the property.
4. Property type and age
5. Security level of the property, doors, locks etc.
6. Previous claims history.
7. Type of tenant.
8. Occupancy.
Additional Cover
There are several things to consider here:
Accidental Damage.
Liability cover.
Malicious damage.
Cost of alternative accommodation.
Renewal
Landlords often insure with their mortgage lender, for convenience, without realizing how much extra they are paying. Even after initial market research, the tendency is to stay with the current provider on renewal.
Claims
The cheapest cover is not necessarily appropriate. Often, there are multitudes of exclusions that prevent a claim. Additionally, the claims service is generally poor. These are important considerations when purchasing a policy.
Reducing Costs
Insurers often insist on particular security requirements, such as special locks, alarms etc. Consider the security aspect carefully, since it makes the property safer, along with reducing the insurance premium.
Those previously holding landlord insurance without a claim often qualify for a discount. Claims can affect future premiums, but different insurers use different criteria to determine this.
Requirements from mortgage or finance companies
Some mortgage lenders make it a condition that their own insurance policies are used. The advantages of a particular mortgage product need to be offset against the potential saving that could be achieved by arranging the insurance elsewhere. Otherwise, it is sensible to shop around and obtain several alternative insurance quotes.
Common Exceptions and Exclusions
Common exclusions are:
Theft, unless there is evidence of forced entry.
General wear and tear.
There are usually limits on the cover for high value goods like video and computer equipment. Insurers may agree to raise these limits, or they can be insured separately for a small additional premium.
Small Print
Ensure that any information given is true and accurate. Read and understand the small print of the policy, so cover is provided for the risks that need cover. Examine the exclusions carefully. Many insurance claims provide invalid because the claimant failed to read the small print. If unhappy about any exclusion, take it up with the insurance company immediately.
Risks Covered
The range of risks covered by a contents policy relate to moveable items within the property.
These may include, subject to the provisos already mentioned:
Fire, lightning, earthquake and explosion.
Storm and flood.
Internal water damage from tanks and pipes.
Oil damage from heating systems.
Theft and attempted theft.
Impact by aircraft, aerial devices, vehicles and animals.
Falling trees or branches.
Riot and political disturbances.
Civil commotion and strikes.
Legal liabilities.
Insure possessions for their full value, or the insurance company will scale down the claim proportionately. It is unreasonable to expect the insurer to carry the full risk if the premium only covers a proportion of it.
Conflict between Buildings and Contents insurance
Buildings insurance protects the property's construction and any permanent items, while contents insurance protects "moveable" household items.
There are some areas where there is apparent conflict between buildings and contents policies.
Fitted kitchen / bathroom: covered by contents policy.
Fitted carpets: despite being "fixed", fitted carpets come under the contents policy.
In order to distinguish between what is covered by a buildings insurance policy, and what is covered by a contents insurance policy, think of contents as being the items taken if moving home.
Consider separate policies
If needing buildings and contents insurance, get quotes for separate policies, from different providers, to maximise potential savings. Most insurers provide separate policies, so locate the best for each policy type and purchase individually.
Conclusion
Proper insurance is vital for any landlord. Liability cover is undoubtedly the most important aspect of any insurance policy, as any tenant's damages claim could prove financially crippling. With regard to contents insurance, a landlord must ensure that the cover is adequate and as cost effective as possible.
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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