Insurance – a promise on paper.

Well lets face it, if Landlords Insurance, or any insurance for that matter, was free we would all have it coming our of our ears wouldn’t we?

Mobile phone insurance, gadget insurance, golf insurance and, I kid you not, handbag insurance. What will they think of next?

It is, as the vast majority of people think, a necessary evil, and you never know how good your policy is until you need to claim. That’s the promise on paper you pay your money for – especially on the bigger things in life such as your car or your home or your life and lifestyle.

Now, as we are on a letting website I’d better talk about Landlords Insurance which in some ways is even more important than your home insurance. At least if you live in the property you have a little more control over mishaps than if you let the property out to someone who could be a complete stranger.

You may be lucky and find the perfect tenant, in terms of paying the rent, but even the perfect tenant can be accident prone and have the odd blonde moment…. Even if they’re not blonde! I, myself, have been a tenant in the past following my divorce, but that’s a whole other story, and during my 2 year tenancy there were no major disasters, there were some very close calls!

Like I said, if it was free, we would take it every time, but because its not we need to balance the cover we need with the price we pay. Now I’m from Yorkshire, so wont be paying over the odds for anything, and when you look round at Landlords Insurance the differences in price can be as wide as the Cheshire Cat’s grin.

So what do you do?

Do you use a broker? Do you buy from a ‘Big Name’? Do you become part of the 21st Century and buy online?

Unfortunately, there isn’t a correct answer as the price you pay depends on the risk your property poses to the insurance company providing the policy to you.

First and foremost though, it really shouldn’t be about the price. You (not the insurance company) need to ensure you have the right amount of cover for your requirements.

Everyone knows that if you insure the property for a lower amount than the actual rebuilding cost it will make the premium cheaper – a great way to save money eh?? Actually no, it could cost you a lot more than you think. Not only could it invalidate any claim, it could potentially reduce the amount of your claim. This is known in the insurance industry as the Averaging Principal.

Lets have a look what that means. You insure your property for £75,000 when the actual rebuild value is £100,000. In the event of a claim you are effectively 25% underinsured which means that if you made a claim for £10,000, the insurance company may reduce the claim by the 25% you are underinsured, which would leave you with a payout of £7,500 less any excess that the policy carries. Ouch!! Even worse, they may not pay out at all.

Make sure it’s the rebuilding cost and not the market value that you insure the property for as the two are very different things. You can find calculators on the internet to help you work out the rebuild value – just one example is on the Association of British Insurers website.

Have you got the all important landlords liability cover? And if so, how much? £1 million, £2 million, £5 million? Most start at £2 million and allow an upgrade to a higher amount. For me this is one of the most important aspects of Landlords Insurance as a normal Home Insurance policy will not afford you this protection.

What happens if you need to claim and the tenant has to move out while the repairs are made, will your policy cover the rent? Some companies cover this as standard and others require you to tick a box to add it on.

Do you get Accidental Damage cover? Some providers offer this free of charge depending on the type of tenant you have and others exclude it depending on your tenant types.

And then there’s the contents aspect of the insurance. You may let your property as unfurnished but the cost of carpets, curtains and anything else that’s in there and not nailed down soon adds up so it may be worth assessing the cost of replacing a carpet, should some damage occur. Most companies offer a lower level of £5000 for contents cover.

At the end of the day, it’s down to you. Do you go for the level of cover you need or do you go for the cheapest? I can’t answer that question for you but will take you back to my opening line…. If insurance was free we would all take it!!!

This is just the Buildings and Contents aspect of insurance. What about checking your tenants to make sure they are credit worthy? What about protecting yourself if your tenant does a runner in the night or you need to evict them? I feel other blogs coming on for Tenants Referencing and Rent Guarantee so keep checking back for those.

Here’s to happy (and safe!) landlording!!

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