As a landlord, keeping track of your important paperwork and legal duties can be overwhelming at times. With documents to sign, certificates to renew and inspections to schedule, ordering your priorities can be a bit of a juggle – but one thing that should definitely be at the top of your list is your insurance.
In this blog post, we’ll answer all your questions about Buildings and Contents Insurance, including what it covers, why you need it and how it’s different to homeowner’s insurance.
- What is Buildings and Contents Insurance?
- Do I need Buildings and Contents Insurance to let my property?
- What is the difference between Buildings and Contents Insurance and homeowners insurance?
- Do I need Buildings and Contents Insurance if I have a lodger?
- Why do I need Buildings and Contents Insurance?
- Does my tenant need insurance?
- Is Buildings and Contents Insurance a legal requirement?
- Do I need to purchase insurance from my mortgage provider?
- How can I purchase Buildings and Contents Insurance?
What is Buildings and Contents Insurance?
Buildings and Contents Insurance covers the cost of repairing the structure of your rental property and replacing damaged and/or stolen items kept inside. Buildings and Contents Insurance can be purchased as separate policies, but it’s often easier and simpler for landlords to take out one policy that covers both.
The ‘Buildings’ element of the insurance covers just that – the building. It protects your property from damage caused by bad weather, fallen trees, frozen or burst pipes, fires and explosions – plus situations that involve people, such as vehicle collisions, vandalism or theft. Your policy can cover a whole host of things, but it must be noted that small maintenance and repair work needed due to general wear and tear is not covered by Buildings and Contents Insurance.
The “Contents” part protects everything in the property that the landlord has supplied. This can range from anything such as electrical appliances, white goods and large furniture to carpets, curtains and blinds.
Do I need Buildings and Contents Insurance to let my property?
Many landlords are under the wrong impression that their property is covered under their homeowner’s insurance. The reality is that homeowner’s insurance is not applicable to a rental property and will not cover your damages – but why aren’t all landlords aware of this?
As we know, people can become landlords in various ways. Some purchase a property with the intention of operating it as a business – better known as buy-to-let landlords. These ‘intentional’ landlords are often familiar with the rental industry or – if it’s their first rental property – they are likely to seek professional advice to make sure they have the correct documents in place – insurance included.
Others can become landlords unintentionally – perhaps they’ve inherited a property in their relatives will or have moved into their partner’s home. In this circumstance, a new landlord may be unfamiliar with the documents they need and incorrectly assume that homeowner’s insurance will suffice.
Building and Contents Insurance isn’t the only insurance policy you need. Take a look at our previous article to find out what other insurance policies landlords should have.
How is it different to homeowner’s insurance?
While you live in your home as an owner-occupier, your homeowner’s insurance is based on the fact that you yourself are living there. As the occupier, you are in sole control of the property; taking good care of it and only allowing people you know into your home. As a result, the risk of loss or damage is lower and your insurance company will charge a premium that reflects this modest risk.
If you decide to let your entire home, then your existing insurance may well be totally inadequate. Insurance companies take a dim view of suddenly finding that a home they thought was owner-occupied is being used by someone else completely. Their risk is far greater and the policies you have are unlikely to provide all the protection you need in any event.
It is highly likely that a claim would be rejected if they are not advised of any change in circumstances relating to the property they insure – including it being unoccupied for any significant period, perhaps while renovations are being undertaken, or between lettings. They will certainly not cover legal expenses or rent recovery in the event of default. In this case, it is essential to seek professional advice to ensure that you have adequate property owners’ insurance.
Do I need Buildings and Contents Insurance if I have a lodger?
If you have a lodger, homeowner’s insurance is enough as you, the homeowner, are also living in the property. This being said, you must inform your insurance provider of any lodgers you take on or your policy may be invalidated.
If there are ‘other’ people using the property, either on an occasional basis or all the time – the risk of loss is greater, and your insurance provider will need to charge more to cover the increased chance of claims. If your insurance provider does not know that your property is being let – even partially – they cannot receive the right money and your claim may be rejected for what is called “non-disclosure”.
If you let furnished accommodation in your own home to a lodger and your total receipts (rent plus income from meals, laundry service, etc) are £7,500 or below you can get this income tax-free under the ‘Rent a Room’ scheme.
The scheme has encouraged many people with spare space at home to let a room. It is important, however, to ensure that your insurance company is informed and the facts are noted on your policy. This may cost a little more – and some restrictions on the cover may apply – but you will then know that you are covered and will not receive an unpleasant surprise should a claim be turned down.
Why do I need Buildings and Contents Insurance?
To put it simply – Buildings and Contents Insurance provides your property with complete protection. If you and your tenant were met with a catastrophic situation, such as a flood, a fire or a burglary – footing the bill is the last thing you’ll want to think about.
Having Buildings and Contents Insurance provides you with total peace of mind. Whilst the likelihood of an unfortunate event unfolding is low – these things do happen, and its best to be prepared than to be left out of pocket.
Buildings and Contents Insurance protects your property inside and out – meaning if any furnishings or appliances you supply to the tenant is damaged, the cost is covered. Having this protection in place gives you a level of reassurance and could save unnecessary animosity or disputes with your tenant when it comes to their deposit. This being said, it is still wise to conduct a full inventory and schedule of condition before the tenant moves in – even if your contents is covered.
Do you have rent guarantee insurance? Ensure your rent is paid on time, every time with our Rent on Time plan.
Does my tenant need insurance?
Whilst Buildings and Contents Insurance protects the items you provide, it does not cover the tenant’s. When your tenant moves in, it’s a good idea to remind them to purchase their own contents insurance policy to protect their own belongings.
Is it a legal requirement?
Having Buildings and Contents insurance is not a legal requirement, however, it is strongly recommended when letting a property. Additionally, landlords must bear in mind that Buildings Insurance is likely to be a part of the terms of their mortgage. If you’re not sure, be sure to check your mortgage agreement to confirm.
Do I need to purchase insurance from my mortgage provider?
No, you don’t. It used to be compulsory for homeowners to purchase their insurance from the mortgage lender, but this is no longer the case. The Office of Fair Trading ruled that this was unfair – however, many people still purchase from their mortgage lender because they wrongly believe they have to.
How can I purchase Buildings and Contents Insurance for my property?
Alan Boswell offer Buildings and Contents Insurance to landlords all across the UK. If you already have a policy, don’t worry – Alan Boswell will aim to beat your current premium.
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