What Does Buy To Let Insurance Cover?
Buy to let insurance covers building insurance as a standard and usually public liability for property owners as well. At the same time, other extras can be included or added, such as contents insurance, accidental damage, home emergency cover, rent guarantee, loss of rental income and legal expenses.
The amount of cover depends on the provider and the number of extras a landlord wishes to include. According to NimbleFins, here is a list of features to look for in buy to let insurance:
- Building insurance: Protects against damage to the building’s structure or anything permanently fixed to it. As well as the obvious aspects like walls and windows, kitchen cabinets and baths are also included. The litmus test in the eyes of the Financial Ombudsman is whether or not an item could be reasonably removed from the property to take it elsewhere. If it can be, like a sofa, it falls under contents insurance. If it needs specialist removal, such as a built-in fridge, it is covered by building insurance.
- Public liability: This covers compensation and legal expenses if a tenant, one of your employees, or another third party is injured due to the property’s issue. This could be a tenant tripping over an upturned piece of carpet that wasn’t fitted properly and breaking their leg. Public liability is included as a standard in most buy to let insurance policies.
- Contents insurance: Insurers will pay for the cost to repair or replace an item provided in the rental property. Contents insurance covers sofas, beds, etc., that come with a furnished property and the free-standing white goods and other items that are often included in a non-furnished home. Some buy-to-let landlords opt just for contents insurance rather than full landlord insurance if the building itself is already protected under a separate freeholder policy. It can be risky relying on the freeholder’s building insurance as the leaseholder has no control over how comprehensive their policy is, as explained by solicitors at IBB Law. Contents insurance is usually an additional premium.
- Accidental damage: If something is damaged or broken accidentally by a tenant, employee or visitor, insurers will meet the repair or replacement cost. They will not pay out if the damage was not accidental. Take a smashed window. If it was broken by a child accidentally kicking a ball through it, insurers would payout. But if it was caused by someone throwing a brick, then it would not be. Accidental damage is usually an add-on to a policy.
- Home emergency cover: Around-the-clock access to assistance and contractors if there is an urgent incident. This number can be used by the landlord but also passed on to the tenant or property management company if the landlord wishes.
- Rent guarantee: If a tenant stops paying rent, this covers the income not received. A rent guarantee, also known as tenant default insurance, can also cover the legal expenses to evict a tenant if a landlord chooses to take action. A rent guarantee is an extra add-on to buy to let insurance.
- Loss of rental income: If the property becomes uninhabitable, such as if there was a fire and rent cannot be charged, a landlord can claim the loss of income. This is a particular lifeline if the landlord has a mortgage against the home. This clause can also cover the cost of re-letting the property. Loss of rental income protection is usually an add-on to a buy to let insurance policy.
- Legal expenses: A landlord may find they need legal assistance to evict a tenant, chase rent arrears or defend themselves in the case of a public liability claim or investigation. Legal expenses cover provides access to experts for advice and carrying out proceedings on a landlord’s behalf. Legal expenses usually cover an add-on to landlord insurance.
Buy to let building insurance
Buy to let building insurance protects the structural aspects of a property plus anything attached to it. This includes walls, drains, guttering and pipes, cables and wires, doors, windows, pavements, patios and yards, car parks, driveways, fences and gates, plus internal fixed items including fitted kitchens and bathrooms, stairs and fitted wardrobes.
The cost of repairing or replacing damaged items will be met if the cause was a covered event such as:
- Natural: Storms, floods, lightning, earthquake.
- Criminal damage: Robbery, burglary, theft, riot, civil commotion, malicious damage.
- Other unexpected incident: Fire, escape of water, explosion.
Some insurers will protect against “all risks” bar specified exclusions, while some will only cover “certain risks”, with the above usually being the bare minimum. Some policies can also cover boiler breakdown, pipe leaks, and even swimming pools and tennis courts.
Do you buy to let insurers cover legal expenses?
Legal expenses are often covered by buy-to-let insurers, although it is not always a standard clause in a basic policy. If the legal cover is something a landlord is concerned about, it is worth checking the small print with a policy and – if it is not included – inquiring whether it can be added on as an extra.
Landlord legal cover will meet the cost of solicitor fees if a property owner finds themselves needing to take more serious action against a tenant or if a landlord needs to defend themselves due to a tenant or other body making a legal threat against them.
This could include non-payment of rent, trespassing, repossession or damage to the property. Most landlord insurance policies do not include the tenant’s default, and experts told NatWest, so legal cover is a good back up if things do take a turn with a renter.
On the other hand, legal issues against the landlord where legal cover is required include liability claims if a tenant or visitor was injured due to something in the property. Or if the tenant claims the landlord has not followed legal or statutory regulations. A third party such as HMRC may also call an investigation where the landlord may require legal advice or defence.
Buy to let public liability insurance
Buy to let public liability insurance is a protection against a tenant suing a landlord for an injury that occurred at the property. If a tenant or visitor hurt themselves because of what they claim was negligence by a landlord, public liability insurance would cover legal costs, compensation payments, medical bills and repair bills.
An example could be a loose kitchen cabinet door that fell off and broke a tenant’s toe. Public liability insurance would cover solicitor fees, and settlement claims up to the coverage limit.
Public liability insurance can also cover damage to a neighbouring property caused by something that went wrong in the landlord’s rented accommodation. For example, a burst pipe leaked water through the property’s floor and the ceiling of a neighbour’s home. This insurance would cover the costs to repair the neighbour’s ceiling.