Insuring My Rental Properties…What Do I Need To Know?

There has been much conversation around landlords obtaining the right insurance and the crucial nature of the correct protection, both for themselves and their tenants. This blog does not constitute insurance advice in any way but aims at providing points to consider, and we of course will always recommend that you seek advice from a qualified insurance broker.

We think these helpful points may offer some guidance on how landlords can secure the best insurance cover.

If you are unsure what covers you need, or how best to ensure you are protected we highly recommend that you speak to a qualified, FCA regulated insurance broker who can give you advice, and tailor a policy to suit your needs.  The Eastern Landlords Association works in Partnership with Drayton Insurance (Part of the Ethos Broking group) who will be able to offer you advice and a recommendation on insurances to meet your needs.  Whilst we appreciate that sometimes this can be more expensive than sourcing your own policy, having that advice can make all the difference in the event of a claim.

Some more points to be aware of:

1. Understand the Types of Insurance Available

• Buildings Insurance: This covers the structure of your rental property against risks like fire, vandalism, weather damage, accidental damage, and theft

• Liability Insurance: This will protect you if someone is injured on your property and decides to sue which could include slips, falls, or other accidents that could happen in common areas (like hallways or staircases)

• Rent Loss Insurance: Also known as "loss of rent" insurance, it covers the loss of rental income if the property becomes uninhabitable due to a covered event (like a fire or flood)

• Contents Insurance: If you offer your properties furnished, or they contain appliances, contents insurance will protect those items from damage or theft

• Tenant Default Insurance: Albeit not covered by all insurance policies, this default insurance can be available if a tenant stops paying or breaks the tenancy agreement early

  
  

2. Know the Legal Requirements

• Mortgage Lender Requirements: If you have a mortgage on the property, the lender may have specific insurance requirements, Almost all lenders stipulate as a contractual term, that the buildings must be appropriately insured at all times throughout the mortgage term.

  
  

3. Choose a Policy That Matches Your Needs

• Assess your property and risk factors to determine the right level of coverage. For instance:

  • HMO properties: There are policies specifically designed for HMO’s and a standard policy may not be adequate

  • Vacant properties: If your property is vacant for an extended period, consider specialised vacant property insurance to ensure you’re covered during that time.

  • High-risk locations: If your property is in an area prone to floods or other landscape/location related conditions, consider specialised coverage for those specific risks.

4. Ensure Adequate Liability Coverage

Please note that included in your ELA membership is a policy covering tax investigation and legal defence in case your tenant sues however this is subject to terms and conditions and will not cover all eventualities.

• General Liability Insurance: This is essential if someone gets hurt on your property. Even if you have renters' insurance, your tenants may not be covered for certain types of accidents or injuries.

• Umbrella Insurance: This is an extra layer of liability insurance that provides additional coverage above and beyond what your primary policy offers. It’s relatively affordable and can be a good safeguard.

  
  

5. Consider Contents Insurance for Tenants

• While contents insurance is not mandatory, it’s a good idea to require your tenants to have it. This will protect the tenants’ belongings and can cover damages caused by the tenant to your property.

• Some landlords include it as a clause in their tenancy agreements, making it a requirement for tenants to maintain contents insurance during their term.

  
  

6. Compare Policies and Providers

• ELA have a partnership with Drayton Insurance who are able to offer member discounts. It is worth speaking with them in the first instance to see if you can get a good quality policy at a fair price, for your needs and circumstance.  But naturally it might be a preference for to look to comparative insurance companies to find the best coverage for the best price

• It is however worth looking specifically for providers with experience in landlord or rental property insurance. A specialised insurer will be more familiar with the unique needs and risks of rental properties

  
  

7. Review Your Excess and Coverage Limits

• Consider how much you can afford to pay out-of-pocket in the event of a claim and set your excess accordingly. Keep in mind that a higher excess can lead to a  lower premium in some cases

• Make sure your policy covers the full replacement value of your property and assets (Where possible), not just the market value, to ensure you don’t face a shortfall in case of loss

  
  

8. Review Your Coverage Regularly

• Don’t auto renew each year without revisiting your insurance policy to check it’s still valid and suitable for your needs. If you’ve done renovations or increased your property’s value, you may need to update your coverage limits mid-year, but certainly will need to look to update it for the renewal

• If your tenant situation changes make sure your insurance reflects these

  
  

9. Document Property and Inventory

• To make the claims process easier in the event of damage or loss, document the condition of your property and any valuable items you provide (like appliances or furniture). Take photos or videos and keep a detailed inventory.

• Keep records of repairs, maintenance, and improvements that can help validate the condition of the property before a claim.

  
  

10. Consider Adding Flood, Earthquake, or Other Specific Insurance

• If your property is in an area prone to specific natural disasters (floods, earthquakes, hurricanes, etc.), ensure you have specialised coverage for these events. Standard landlord insurance may not cover these risks. These policies are often sold separately, and depending on where your property is located, they could be essential.

  
  

11. Avoid Common Mistakes

• Underinsurance: Don’t skimp on coverage to save on premiums, as it can lead to significant financial losses in the event of a claim – Insurers don’t just pay up to the sum assured, if your underinsured they may reduce a claim by the % of underinsurance

• Ignoring Liability Coverage: Make sure you have enough liability coverage to protect against accidents and legal claims

• Failing to Update Your Policy: Review and update your policy regularly to account for changes in your property or tenants

• Read your policy documents: especially things like the statement of fact to ensure it is absolutely accurate, and all the endorsements, conditions and exclusions.

By understanding your risks and needs, and carefully selecting the right insurance policies, you can protect yourself as a landlord and minimise potential financial loss. A good insurance policy provides peace of mind and can help you manage the risks associated with renting out property.

A couple of cautionary pointers:

• If you lease your property to a local authority or a housing provider, please check that your insurance company will allow this kind of let as you are not renting to an individual under the normal Assured Shorthold Tenancy Agreement. The insurance company may deem this a higher risk than renting to an individual.

• Ensure your policy is in the name of the owner e.g. if you own and let a property through a Limited company, but the insurance policy is in your personal name, the policy may not pay out.