Insurance needs are niche too with B2L
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Buy-to-let let is without doubt an attractive income-generating investment, especially in today’s difficult economic times when share prices are volatile and savings rates low.
But like any business venture it brings risks and pitfalls with it, which is why having the right insurance policy in place must be a The complexity of risks faced by landlords is far greater than those of the average home ownerhomeowner. These risks simply cannot be covered with a standard home policy.
A couple in Wiltshire ended up with a £20,000 bill to restore their home after it was turned into a cannabis factory
The situation is even more confused by the wide variation in policies in terms of both cover and cost available across the market.
A comprehensive policy must include buildings cover, (and potentially landlords contents), loss of rent and property owners/public liability as a minimum.
It should also cover all the normal risks that we expect from our own home insurance, so to include fire, flood, explosion, burst pipes, subsidence and so on.
But are a couple of big risks are all too often overlooked.
First, there is malicious damage. At the end of every tenancy a landlord will invariably face a number of minor repairs caused by either accident or lack of care by tenants.
But in extreme circumstances a disgruntled or criminal tenant may cause thousands of pounds worth of malicious damage which can cost a landlord dearly if they do not have the right protection in place.
This was highlighted recently in the media by the case of a couple in Wiltshire who despite their best efforts to vet their tenants ended up with a £20,000 bill to restore their home after it was turned in to a cannabis factory.
Although the house was insured they received no compensation for the damage as their policy did not include protection against malicious damage.
Secondly, you have void periods. A big risk here lies in not adequately researching or understanding the nature of a void in occupancy within a buy-to-let policy, and what the implications can be for getting it wrong.
Most policies reduce the cover under the policy during void periods.
But the length of time for which insurers give full cover can vary from one to another, as can whether insurers apply conditions for such events.
Conditions include whether mains gas and water supplies are turned off, whether the central heating system remains on to prevent frozen/burst pipes and how often the empty property is inspected.
Be sure that you know about this detail as your client will expect you to be telling them of these important areas.
These are specialist risks and landlords who wish to avoid being faced with a hefty outlay must speak to a knowledgeable broker who can advise on the variety of complexities they may face and provide a solution that will encompass both foreseen and unforeseen risks.
For landlords with more than one property a broker can also advise on the best way to ensure that the entire property portfolio is all under one policy - thereby delivering a comprehensive package at the best possible price.
The key message is that cheap is not always best. Choose a policy specifically designed for let properties - don’t just rely on a home insurance that has been adapted to cater for a landlord - and shop around. Don’t just accept the mortgage lender’s policy.
Expect the unexpected and speak to a specialist who knows the market.
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