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Is it necessary to have a buy to let insurance?

When renting out your home it’s not quite as simple as merely handing over the keys and then picking up a big chunk of money every month from your tenant to pay off the mortgage.

No, you’ll also need to inform the company you have your residential mortgage with that you’d like to swap over to a Buy to Let mortgage. And, at the same time, you’ll have to look at changing your insurance policies. That’s because both your mortgage provider and insurance company need to know that you are no longer living at the property and that ‘strangers’ will be moving in instead.

Understandably, insurance companies believe homeowners take better care of their own property than a tenant would so you can expect the premiums for buy-to-let insurance – also known as ‘landlord insurance’ – to be a little higher than standard contents cover – even if you do manage to find perfectly respective tenants (more on this later).

In fact, so important is the insurance coverage for a Buy to Let that some mortgage companies won’t even consider providing a mortgage unless they know insurance in the form of buy-to-let buildings cover is already in place.

Types

Buildings insurance – This covers you if there’s roof damage, subsidence or flooding etc to your property.

Contents insurance – Particularly if your flat is furnished, contents insurance is important to ensure that anything damaged can be replaced quickly. It also means you won’t have to dig into your own pockets for spare cash if the TV or cooker unexpectedly goes on the blink.

There are other additional forms of buy to let insurance, such as:

Compensation claims – If a tenant injures themselves in your flat because you hadn’t fixed the shower or the gas cooker was leaking etc, then you could be liable to pay compensation and legal fees.

Loss of rent – If there’s flooding or some other damage which is so severe it means you won’t be able to rent the flat out for a matter of months, then this will pay the rent as if a tenant were there.

Landlord liability cover – If any member of the public injures themselves while on your property e.g. they trip and break their leg due to a loose floor tile, or masonry falls on their head, then this will pay for compensation and legal cover in the event they take you to court and win.

Accidental damage – This covers any damage caused to the flat by yourself or a tenant i.e. it’s not through environmental factors etc.

Void periods – This covers the rent for empty spells between tenancies – regardless of whether the property is habitable or not.

How to cut the cost of buy to let insurance?

• If you have more than one Buy To Let property then get them both/all covered together under the one policy
• Don’t over-estimate the cost of your property’s rebuild fees – otherwise, you could find yourself severely out of pocket with high premiums
• Think about increasing the excess value to bring down the cost of your annual or monthly premium
• Improve security in your flat e.g. install a good burglar alarm and fit a strong lock, such as a Mortice Cylinder or a Deadbolt. Make sure windows are secured with a lock too. Join a Neighbourhood Watch group if there is one
• Try to keep your flat continually tenanted so that it’s not left empty and vulnerable to burglary
• Make sure the tenants you choose to live there are dependable. Working professionals are always preferred to students and DSS by insurance companies.
• Don’t allow your tenants to keep pets on the property. This may seem unnecessarily mean, but new puppies chew continually and cats with long claws can cause a lot of damage to the contents of a flat such as a carpet, as well as skirting boards.