Category: Insurance

As a landlord, you will need different kinds of insurance to protect your property investment against potential accidents, damages or unforeseen calamities. Many landlords just have simple buildings cover, but rent guarantee insurance is one thing that you cannot pass up, as it safeguards one of the most unpredictable aspects of renting properties: the reliability of tenants. This guide will explain what rent guarantee insurance is and why you need it, as well as guide you through the process of how to obtain and use the insurance if necessary.

What is Rent Guarantee Insurance?

This insurance ensures that you are protected financially in the event that a tenant fails to pay their rent. When the tenant arrears on the rent, the insurance will reimburse the cost of the rent, although depending on the insurance policy it might not pay out if the rent goes into arrears. This insurance is not covered in most landlord insurance policy packages, so you need to get rent guarantee insurance on top of that. The insurance is reasonably cheap, going for as little as £90 for a twelve-month policy.

Why It is Important for Landlords

In hard economic times, more and more tenants are finding it difficult to meet their rental commitments. In the private rented sector, more people are being evicted as a result of being unable to pay their rent. But merely evicting a problem tenant will not reimburse you the money you are owed for renting out your property. After all, the time using the property that hasn’t paid for could have been time spent finding and letting out to a tenant who could have paid the rent. While a landlord can go some way towards discerning reliable from unreliable tenants on the basis of tenant referencing and credit reviews, you still can’t foresee the unforeseeable. Personal tragedies may render a tenant unable to pay.

A tenant may be in a difficult situation economically, but they could also simply prefer to use their money in ways other than paying the rent. They might think, if you’ve allowed them to pay the rent late on previous occasions, that you are a soft touch and that they can get away with it. But this sets a precedent for them exploiting your generosity. The tenant-landlord relationship can be tricky to navigate, because nobody wants to kick someone out on the streets if they can avoid it. But this can lead landlords to be overly cautious when dealing with problem tenants. If you are in the undesirable circumstance of having to take a tenant to court for the rent, having rent guarantee insurance gives you more financial security and will probably make the process quick and painless for everybody.

Many rent guarantee insurance packages cover legal costs for this very circumstance. Legal costs can be punishing, the rent owed might be substantial but still not enough to justify the cost of a lawyer. Another common part of the package is eviction costs. These costs can include court costs if the case goes to court, as well as the cost of looking for a new tenant, and the cost of removals if you agree to cover those for the sake of expediency, to free up the house for a new tenant.

But is it worth it to get rent guarantee insurance? In the circumstances where a tenant is unable to pay for rent, it is unlikely you’ll be able to get that money back unless you take them to court. This is why the insurance matters because it is more likely to pay out as more tenants face financial instability and are unable to pay their rent.

How to Get Rent Guarantee Insurance

So how do you go about getting rent guarantee insurance? And how do you ensure that you get a good deal? The first step is to research the different rent insurance policies available. Some more general landlord insurance policies might cover rent guarantee, so make sure that it is not already included in your existing insurance package or a package that you are thinking about investing in.

Also, look closely at the caveats, as well as the circumstances in which the insurance pays out. Is there an upper limit of how much the insurance will pay out? Does this cover legal and eviction costs? This will determine how you budget for court cases or maintenance on the property. Also, how long after the tenant has stopped paying rent will the insurance start to pay out, as it may take a time to authenticate and process the insurance claim? Will the property be usable during this period, and if not do you have other sources of income?

Many rent insurance policies include restrictions on tenant types, e.g. students or people not legally in the UK. This will mean that the insurance company will have to perform a background check on the tenant, which may result in it taking more time.

Once you’ve decided on the insurance package that is right for you, you should seek legal and financial advice before investing in the insurance. If you can, talk to people who have had this kind of insurance to see if it was useful to them and could be helpful to you as well.
Investing in this insurance policy will relieve you of the worry that a tenant could run off with your money. This means you can concentrate on the main stuff, such as maintaining the quality of your property, as well as staying on good terms with your tenants.

As a landlord, you may not already have building insurance. You might have also heard that it’s important to have, and it is. But you might not be sure if it’s for you, or how you go about obtaining building insurance. This article will help to explain what building insurance is, why you as a landlord need to invest in it for all of your buy to let properties and how to do so. This will make you and your tenants more secure, as well as increasing the confidence of buyers in your properties.

What is building insurance?

Building insurance is a specific type of home insurance, the other type being contents insurance. Whereas contents insurance is insurance for the things that you keep in your home such as the furniture, the television, your possessions, carpets and curtains, building insurance covers the permanent fixtures and fittings in the home such as the kitchens and bathrooms. The definition of what is a permanent fixture can sometimes be ambiguous. For example, in Germany when people move house they often take their ovens with them, rather than leaving them in the house as do most people in the UK. But in general, fixtures and fittings are those things that you would leave behind if you were moving house. There is no law which specifies what constitutes permanent fixture, so when getting building insurance you need to specify what you take the fixtures and fittings of your property to be.

Building insurance is a policy covering damage to the structure, the fixtures and the fittings of the property. If the building so defined is damaged, the insurance policy will cover the cost of repair depending on the nature of the damage. Commonly policies cover for damage by natural events such as floods or hurricanes, fire or smoke, vandalism or leaking pipes among other things. The policy will also exclude certain kinds of damage, such as damage by insects, birds or pests. Also, you normally can’t claim for damage that happened while the property was uninhabited for 30 days.

Why is building insurance important?

For rented properties, it is the responsibility of the landlord. It is not the responsibility of landlords to take out contents insurance on the tenant’s property, because it’s the tenant’s property, but since the rented property is ultimately the landlord’s they have to take out the building insurance. This is true whether the property is a house with multiple storeys or a small flat.

The main advantage of building insurance is that it pays off over the long term. On average, building insurance costs £181 a year, according to the AA Premium Index. Over the years, it’s very likely that some fixture, such as the boiler, will break down. This could cost you in excess of £500 for the boiler alone. If you aren’t able to pay for the repairs immediately because you don’t have building insurance, the leaking boiler could cause water damage to the floors and walls of the house. Adding to this the fact that the home won’t be properly heated could result in the spread of damp, which could make the house unliveable. Having insurance can ensure that these problems are solved before they get out of hand, or even before they arise.

Even if these problems don’t manifest, it is hardly worth the risk to put tenants, possibly families, in homes that aren’t insured. More people are finding themselves in privately rented accommodation due to the housing crisis in the UK. These people sometimes end up in damaged or unsafe properties which are not covered for building insurance. When they complain to landlords about the poor conditions, they are sometimes threatened with eviction on no reasonable grounds, simply for making the complaint. These rogue landlords give others a bad name, but taking out building insurance can help tenants to have more confidence in you as a landlord. If you do not have building insurance and put tenants in unsafe accommodation, you can be charged with negligence if they are injured as a result. You can also adjust the rent on the property to take into account the cost of the insurance.

How do I get building insurance?

When getting building insurance, you need to ask several questions. How much cover do you need? Which items does the insurance cover? Over what length of time do you wish to pay the insurance?

You need to consider all these things when choosing an insurance package. You also need to compare insurers, which you can do using an insurance comparison site online such as comparethemarket.com.

You will need to set out with your insurer which items you want to be covered under the insurance package, as well as how you want to pay, whether you want to pay on a monthly basis or in one lump sum. You should also be aware that some insurance packages have additional features for landlords, so look out for those. Insurers are adding more stipulations to their insurance packages in terms of what conditions are included or excluded in coverage, so be sure to read the fine print carefully. You will need to decide if you wish to pay for extras such as legal cover, or if you are confident enough to manage the process yourself. If you do, remember that it is still prudent to consult a legal professional when taking out insurance.

Make sure that you have enough coverage for the full property, otherwise if a part of the property not covered under the insurance is damaged, you might end up having to pay for the repairs in part or in full.

Now you know the basics of why and how to get building insurance. This will hopefully get you closer to your goal of covering your buy-to-let property of damages.