Take Cover!

With landlords’ costs and responsibilities seemingly rising all the time, and the Treasury continuing to squeeze their tax situation, it is understandable that some are looking to reduce their expenditure in order to maintain the yield on their investment.

One area where this can be a serious false economy is insurance – and yet anecdotal evidence suggests that as many as 60 per cent of landlords either hold unsuitable policies or the value attributed to the rented property has not been reviewed, meaning that they may well be under insured.

Particularly amongst ‘accidental’ landlords, there is often a feeling that a standard household policy will suffice. This may save a few pounds in the short term, but it could end up being a very costly mistake.

Even if they only have one property, landlords are businesses, and they face the same responsibilities to their customers as any other business. This is why ordinary household policies are not suitable – and in fact, most will be invalidated completely if the property is found to be let.

Specialist landlords’ policies recognise that the risk profile for a rental property is different. The accidental damage risk of a rental home is thought to be higher, even before you start looking at things like malicious damage.

Then there is the question of liability. If you trip over a piece of loose carpet in your own home and hurt yourself, that’s unfortunate; however, a tenant doing the same may very well hold the landlord to account. Whilst a landlord has responsibility to maintain the property and be aware of any potential hazards, you are going to want your insurance policy to cover any possible repercussions.

Legal expenses cover is strongly recommended, not just to defend any actions, but should it become necessary to go to court to assist with an eviction, for example.

And then there is the issue of rent guarantee cover. This is optional on many policies, but is something all landlords should seriously consider. It will cover you for lost rent if your tenant doesn’t pay (something which landlords currently facing a year or more of the evictions moratorium will have been pleased to have taken out). 

There are some caveats: new tenants must have been properly referenced by a competent agency, and those with existing arrears at the time of taking out cover are unlikely to be offered cover. But nevertheless, rental guarantee cover is highly recommended.

Given the potential pitfalls of holding an inadequate or unsuitable insurance policy, the cost of landlords insurance is actually very reasonable. It is certainly one area where corners should not be cut.

Phil Cooper is residential lettings partner at Arnolds Keys.  www.arnoldskeys.com