Saturday, February 24

What Should Landlord Insurance Cover?

Landlord insurance should always cover building insurance and public liability insurance at a minimum. These are the two basic elements needed in any landlord insurance package in the UK.

Building insurance safeguards the fabric of any property – anything permanently part of it, such as walls, or attached to it, such as guttering.

Public liability insurance provides a safety net against a legal claim against a landlord from a tenant, worker or any other third party. For example, it applies if a third party is injured, or property damaged as a result of something the landlord is responsible for going wrong at the property.

Building insurance and public liability insurance are both explained in more detail below.

Some landlord insurance also provides other aspects as standard, such as boiler cover or 24/7 legal help, but largely the following coverages are additional extras:

Accidental damage: If the contents or building is damaged unexpectedly, such as red wine spilling on the carpet or something is dropped smashing a tile.

Contents insurance: This meets the cost of repairing or replacing a damaged or stolen item owned by the landlord (so long as the event is covered by the policy, like a fire or burglary). Some properties are let on a furnished basis, in which case beds, sofas, other furniture would be included. But for properties rented out unfurnished, there are still a number of items that could be covered by contents insurance, such as a freestanding oven, carpets, curtains etc. However, landlord contents do not cover a tenant’s contents. It is their responsibility to source their own insurance (unless the damage to the tenant’s belongings was caused by something going wrong at the property, making it a third party liability claim).

Loss of rental income: If a landlord is not making money due to an incident that is making the property unhabitable, this will cover losses due to missed rental income. A landlord may particularly want to consider this if the rental income is going towards something that is non-negotiable, such as a mortgage.

Rent guarantee/tenant default guarantee: This covers the cost of rent that is charged but not collected if a tenant does not pay. The rent guarantee can also help to fund the legal process of eviction or debt collection. It is estimated rent defaults could treble as a result of coronavirus, according to the London School of Economics (LSE) and Trust for London, with 700,000 tenants likely to hit financial difficulty in 2021.

Legal expenses cover: A landlord may need to defend itself in the event of a tax or health and safety investigation or a liability claim from a tenant or third party. They may also find they need to prosecute over a tenancy dispute or damage claim.

Landlord public liability insurance

Landlord public liability insurance covers legal, medical and compensation costs if a tenant, visitor or tradesperson is injured, dies or suffers damaged property where the fault lies with the landlord.

A landlord could be sued for negligence by these third parties and forced to pay thousands of pounds in defence costs and settlements if they lose or out-of-court settlements.

One example could be there is an explosion at the property, and the tenant sues after becoming injured and losing their possessions.

Public liability for landlords can also cover damage to a neighbouring home if it is the result of an incident at the landlord’s property. For example, if a tree fell down, crushing both a tenant’s car and a neighbour’s wall, insurers would pay to repair or replace both, plus any other compensation costs or legal fees.

As with all landlord insurance, public liability insurance isn’t legally required for a property owner. However, it is one of the basic parts of any decent landlord insurance alongside buildings cover.

It is the landlord’s responsibility to ensure the property is well-maintained, and public liability insurance will not pay for the cost to fix a fault that could cause injury.

Landlord building and contents insurance

Landlord building and contents insurance are two separate clauses in a landlord insurance policy. While building insurance is the standard aspect of any landlord insurance, contents insurance is generally an extra safeguard added at a supplementary cost.

Building insurance protects against any damage to a property’s structure, inside and out, plus anything permanently attached to its walls and floors.

As well as obvious elements like walls, windows, doors and pipes, building insurance also covers fire places, fitted kitchens, fitted bathrooms, tiles and laminate flooring. While it should cover fitted fridges and dishwashers, it doesn’t cover free-standing items (e.g. items that could be taken in a move).

Building insurance may extend to some external areas such as a driveway, car park, patio, yard, walls, fences and gates. And it also includes wires and cables, guttering and the roof.

Typically, an insurer will pay out if the building is victim to flood, fire, storm, lightning, earthquake, explosion, and criminal activity such as theft, burglary, riot, or malicious damage. But as with everything, this can vary from policy to policy.

Providers will not pay out if the damage is obvious due to wear and tear general deterioration, or poor workmanship.

Meanwhile, contents insurance applies to anything which is easily transferable to another property, such as freestanding appliances and furniture, plus carpets.

Landlord contents insurance does not cover a tenant’s belongings, only those the landlord owns. This means if there was a fire at the property, an insurance provider would pay for the landlord’s washing machine, carpets, fridge and oven, but not the tenant’s clothes, sofa and laptop that were destroyed.

It is up to the tenant to ensure their contents, although it cannot be made a requirement of a tenancy agreement. However, despite the fact, many renters would be classed as not having financial means to replace their high-value contents, only 19% of tenants are thought to have contents insurance, according to one study by the Financial Inclusion Commission.

Landlord insurance legal cover

Landlord insurance legal cover offers access to advice and meets the cost of hiring solicitors in the event of a dispute. There are a number of scenarios where a landlord faces legal bills.

They may need to take action against a tenant if the property or its contents are damaged maliciously and the landlord wants the cost of their replacement covered by the tenant.

Another issue could be if a landlord wants to evict the tenant. In this case, the legal insurance cover would assist with the legal process, representation and the cost of their work.

A landlord could also find they are at the centre of an investigation, and legal expenses cover would meet the cost of representing the homeowner. This could be a tax investigation or a health and safety investigation, for example.

A tenant, contractor or visitor could also bring a dispute against the landlord over claims of negligence, and the legal insurance cover would meet the cost of legal representation again.

Most insurers also provide a legal advice helpline to talk through steps to take should the landlord require assistance.

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