Often there’s a lot of confusion surrounding tenant and landlord responsibilities when insuring buy-to-let properties, as well as what types of insurance are available. With this in mind, we’ve put together a short guide outlining the different types of buy-to-let insurance available.
Landlord building insurance
As a general rule of thumb, it will be a requirement of your mortgage agreement to have landlord buildings cover in place. Landlord buildings insurance (also known as buy-to-let house insurance) works as a normal buildings insurance policy, in that it will cover against fire, theft, flood and a multitude of other risks should the unexpected happen. However, the main difference is that buy-to-let house insurance also covers you against the added risk of tenants residing in the property, rather than it being occupied by the owner. For example, a buy-to-let house insurance policy will usually cover loss of rent, as well as malicious damage by tenants. You can also add accidental damage cover to the policy if required, and sometimes this is even included as standard.
There’s usually a fair amount of confusion as to who should be covering the contents in the property, as well as what is defined as ‘contents.’ Essentially, if you were to tip your house upside down, anything that falls out would be considered contents. Anything that remains (such as fitted cabinets and doors) would be considered a part of the structure, and therefore will be covered under the buildings insurance policy.
It’s also important to note that landlords are only responsible for insuring the contents that they own – so if the property is furnished, for example, landlords will want to include an element of contents insurance cover. This can either be purchased as a standalone insurance policy, or added onto your buildings insurance. Tenants are responsible for insuring their own belongings, and can purchase tenants’ contents insurance as a standalone policy. This will sometimes also include an element of tenant liability insurance, which covers the tenant for their liability to the landlord’s belongings – so if they accidentally spilled wine over the landlord’s carpet, for example, this would be covered under the tenant liability section of the policy.
Rent guarantee and legal expenses insurance
Another option for landlords, who perhaps have concerns about the tenants residing in their buy-to-let property, is to purchase rent guarantee and legal expenses insurance. Unfortunately, situations do occasionally arise when tenants fall into rental arrears, which can be an issue if the landlord is relying upon the rent to meet their mortgage payments. Rent guarantee and legal expenses insurance will not only pay for the rental arrears, ensuring that the landlord is not out of pocket, but it will also cover the legal expenses involved with evicting the tenant – which can be a very costly and long-winded process.