Buying an investment property is a big step, so it’s crucial to protect it with landlord insurance. As soon as you’ve bought the property, the next step should be sorting out the appropriate cover.
Landlord insurance can cover everything from unforeseen repair bills or accidental damage by a tenant to the possible loss of rent if the property becomes uninhabitable. It can also insure against storms, fires and floods. Always check the small print so you know exactly what you have covered.
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There isn’t a legal requirement to take out landlord insurance. However, it would be foolish to overlook it, as an ordinary home insurance policy won’t cover your property if you’re renting it out to tenants.
If your investment property is mortgaged, your lender might ask for proof you have buildings insurance in place. It protects you and the lender against the possible financial risks of damage to your buy to let home.
Once you have the insurance organised, it’s time to move your tenants in. The problem with renting to strangers is you can never be 100% certain they’re the right people for your home. No matter how thoroughly you vet them, there’s always a chance something might go wrong. Your insurance will be crucial to saving you from financial loss.
Renters who don’t pay
These are potentially the worst kind of tenants, as your property is your business. When they pay late or run up arrears, this is impacting your income and this can put you in debt. You might have to enter the costly and time-consuming process of eviction.
The best way to avoid this is to ask their previous landlord for a reference and run a credit check on potential tenants. Debts and late payments elsewhere should be a red flag. You should also look for an insurance policy with landlord guaranteed rent cover.
Tenants who damage your property
If a tenant causes serious damage, it impacts your finances in a big way. You may be unaware of the damage until they move out, as they have kept it well hidden. It could include cigarette burns to carpets or soft furnishings; furniture damaged by harsh use or pets; appliances broken through incorrect use; damaged ceilings or walls due to an overflowing bath; or a host of other problems.
Getting a reference from the previous landlord can help spot the signs, but should you fall victim to this type of tenant, you need landlord insurance to replace your damaged items and get your property habitable for the next occupants.
Tenants who won’t leave
This is a legitimate concern if you’re a rental property investor. If they have been asked to leave for not paying the rent, but refuse to do so, even when you’ve gone through the correct legal channels, they may need to be forcibly removed through the power of the law.
However, this means it can take longer to vacate your property and you’re not earning any income in the meantime. Again, insurance with landlord guaranteed rent cover can save you from financial hardship.
Nuisance tenants
If you own an HMO or any type of property shared by a number of individual tenants who aren’t connected, it can cause problems if one tenant is a nuisance. Maybe they play loud music, exhibit antisocial behaviour, or don’t clean their flat or room, leading to smells in communal areas.
Unfortunately, if you can’t evict them, other tenants might leave to escape the hassle. This leads to more vacancies and a loss of income for the landlord. A good landlord insurance policy will cover you for loss of rent on the vacant rooms.
Irresponsible pet owners
While pets aren’t normally a problem, some irresponsible owners are! They may let their animals damage the furniture, such as cats using the sofa as a scratch pole, or young dogs left alone to chew the table legs or skirting boards. This makes it hard to rent out the property once they’ve left and you’ll need to spend money getting it into a habitable state again.
The bottom line is that nuisance tenants can severely damage your rental properties business. As a landlord, you need to do all you can to prevent them from moving in.
Young children
Statistics from UK insurers reveal young children cause an average of £400 damage in the home in the first three years of their life. The most common damage is to paintwork and wallpaper. The second most common damage is to furniture, which can sometimes be repaired but may need replacing.
Toddlers have also caused damage to other household items, according to insurers, with one of the most dangerous being damage to plug sockets and electric cables. Picture frames and mirrors have been smashed, the TV knocked over or the screen damaged, and bookcases and shelving units broken.
Who pays?
The Landlord and Tenant Act 1985 stipulates damage caused to a rented property by tenants or visitors should be reported to the landlord. Repairs or replacements must be paid for by the tenant. However, research shows 27% of tenants don’t tell their landlord about major damage, with 11% saying they would try to repair it themselves.
A survey by You Gov revealed 23% of tenants had suffered a flood, fire, burst water pipe or damage to their home in the past 12 months. An estimated 400,000 UK landlords have their property damaged every year by renters.
If the tenants won’t or can’t pay for the damage, or if they do a runner and leave your property in a mess, accidental damage cover is extremely important. Without it, your property will become uninhabitable. While some landlords are able to repair the damage themselves, 120,000 per year have had to make an insurance claim.
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