Paymentshield, the provider of insurance to mortgage intermediaries, is calling on the industry to take action and ensure landlords are adequately covered for their properties given recent changes in the market.
The Office of National Statistics’ (ONS) revealed private rental prices paid by tenants in Great Britain rose by 2.5 per cent in the 12 months to June 2015, undoubtedly sparking a surge in interest from existing and potential buy-to-let investors across the nation.
With rents rising and buy-to-let demand expected to grow further, Paymentshield believes landlords should be advised to find the best policy to protect their investment.
Specially designed landlords insurance products provide policyholders with a greater level of protection against damage or loss, over and above circumstances typically covered by traditional home insurance, such as fire and theft.
Lee Mooney, commercial director of Paymentshield, comments:
“Just as mortgage requirements can differ when purchasing a buy-to-let property, the cover needed to protect properties occupied by tenants is more complex.
“Purchasing a buy-to-let property is a major investment and it’s essential that landlords also invest in a comprehensive policy to protect them from the potential damage or losses involved with letting a property.”
“House prices have risen by up to 9.3 per cent in the last year[1], making it increasingly difficult to climb the property ladder and leaving people with no other option but to rent.
“Whilst this is great news for property investors, it reinforces the importance of ensuring that landlords are investing in the correct cover – not only to protect their property and contents but also their legal liabilities as the property owner.
“Landlords could be financially ruined if a loss occurred and they found their insurance did not provide appropriate cover leaving them with no choice but to fund their own repairs, replacement or even rebuild. Intermediaries, such as mortgage advisors, are in the perfect position to communicate this to clients and it’s vital that as an industry, we work together to educate clients about the need for adequate insurance.”
Unfortunately there are a lot less providers in the market for landlords’ insurance than for home insurance, policies are significantly more expensive than home insurance, but cover tends to be significantly worse, and cover when properties become empty can become non-existent at worst and highly reduced at best. Excesses can also be prohibitive. If a property is empty, for example, there may be a strong case for taking the risk and self-insuring. It depends entirely on your specific circumstances.
This advisor is giving what seems to be obviously good advice, but he has a vested interest. What he should be advising is to assess your risks carefully, assess your appetite for risk and be careful to get appropriate cover for you, not him. This means shopping around and checking your policy for yourself and not relying entirely on people like him unless you are sure he knows what he’s doing, whether qualified or not – many don’t!
If he gets his way and legislation comes in to prescribe cover to fit all, it will only serve to inflate premiums for good landlords. Bad ones will still ignore the rules and best practice.
Those are my thoughts.