Buy-to-let
Redbrick, a division of The Paragon Group of Companies, found that only two thirds (67 per cent) of landlords have specialist buildings cover for their buy-to-let investments, whilst only 12 per cent have combined legal expenses and rent guarantee insurance, even though 71 per cent of landlords expect tenant arrears to increase in 20091.
Tony Armitage, Redbrick Landlords insurance director, said: "Landlords need to carefully consider their insurance needs and ensure that they are properly protected. It is amazing that only two thirds of landlords have specialist buildings insurance, with the other third presumably having a standard household policy or, worryingly, no insurance at all.
"In addition, tenant arrears are on the increase and landlords can easily cover themselves for rent arrears through a rent guarantee insurance product, which also includes the legal expenses involved in evicting the tenant. There appears to be a lack of awareness about the availability of these products and in the current environment landlords should be doing all they can to protect themselves.
"Buy-to-let landlords have sophisticated insurance requirements for which a typical household policy is often unsuitable. The biggest irony is that some landlords are actually paying through the nose for potentially unsuitable cover."
Most standard household policies are designed for owner-occupiers and can present some serious shortfalls for landlords and buy-to-let investors. These can include:
Unoccupancy: Ordinary household policies typically exclude burst pipes and theft cover if the property is unoccupied for more than 30 days. Longer periods of unoccupancy are comparatively rare in the case of homeowners, but for landlords who are carrying out refurbishment work or who may experience a void period, this time limit is far too restrictive.
Malicious Damage: Whilst a specialist landlord policy should cover malicious damage by a tenant, most standard household policies carry a specific exclusion. And if the property is badly damaged, standard insurance policies will cover the cost of alternative accommodation but will not necessarily cover the loss of rental income
Legal Bills: Landlords could face a large legal bill if a tradesperson carrying out work to their property is injured. Homeowners can be held liable in these circumstances, and once again personal legal liability will be covered by their policy. But this important protection will typically exclude any liabilities arising in connection with the policyholder’s trade or profession – not much use if you are a professional landlord. A specialist let property insurance policy should always provide legal liability cover in relation to the general public and also employees, in case the injured tradesperson is deemed to be employed by the landlord
