Landlords Insurance – A waste of money?
There are plenty of things in life which turn out to be a waste of money.
However, in our experience landlord’s insurance isn’t one of them.
I need to qualify that last statement a little. Good landlord’s insurance is a worthwhile use of money and often very good value.
The quality of policies and what they cover vary enormously. Like many things in life the cheapest option is rarely the best and is cut price for a reason.
Insurance policies not only give you peace of mind but when they are needed can save you time, money and a lot of hassle.
There are two main types of insurance we recommend to landlords, legal and rental. Both are good investments.
Legal insurance covers you if you ever have to get solicitors involved in a dispute with a tenant. Usually these disputes involve damages or rent arrears.
There’s also rental protection. This does what it says on the tin and protects you if a tenant stops paying their rent.
Again we’ve seen this cover serve landlords well in the past especially if the monthly payments are going towards paying on a mortgage on the property.
Home emergency repair insurance is also something worth considering. It gives the landlord cover if say for example a pipe bursts or something unexpected happens. These policies usually offer a 24/7 service which means the issue is fixed quickly in most cases.
Don’t forget buildings and contents insurance. Even if you don’t have a mortgage on the property you’ll still need buildings’ cover. And if you’re property is not furnished contents insurance is often still worth having as building cover does not include your carpets, curtains, kitchen ware etc.
So when it comes to being covered it’s certainly not a waste of money.
A real example of where a rent and legal would have been useful:
Tenants stopped paying rent after month 4 on a substantially large house, the rent being around £1500 per calendar month, so as you can imagine the rent arrears on a property of this price mount up pretty quickly.
After several months of no rent and the landlords patience starting to wear thin of broken promises they had no option but to instruct a solicitor to serve a section 8, 10 & 11 upon the tenants to gain possession of the property, which are for rent arrears and persistent rent arrears. This was the landlords only option to gain possession as the Tenancy Agreement all parties agreed and signed was a fixed 12 months term.
The short version of this story is the landlords were awarded possession of the property via a court hearing and a date was set for the tenants to vacate. The date came and the tenants had vacated but the downside was the state the property was left in. There were possessions left meaning notices had to be served to attempt to locate the tenants to give them the opportunity to collect their remaining possession, therefore causing further delays for the landlords to be able to put right any damage, clean the property and get it re-rented to avoid any lengthy void period where still no rent was being achieved.
The total cost of this case to the landlords in respect of repairs to any damages, fees and rent arrears mounted to over £10,000, in this case the landlords had no insurance policy meaning all fees and repairs etc had to be paid from their pocket. If they only had a rent and legal insurance policy in place the loss amount to them would have been substantially less.
Based on this case when I initially speak to landlords about renting out their property I always strongly advise landlords to take out or just look at the benefits of a rent guarantee and legal expenses cover to protect them for if the worst was to happen. Even with the thorough references, letting agents can never envision what the future may hold. It goes back to that old saying, “it will never happen to me” would you like to leave that to chance? I know I wouldn’t!
The name rent guarantee can be slightly confusing; most people believe this cover can only be used when tenants fall into arrears. Depending on the insurance company and the terms, most will have a legal cover that can be purchased separately or included with the rent guarantee policy. This will cover landlords up to a set amount to enable eviction of a tenant who has breached the Tenancy Agreement as well as cover the rental payments for a set period of time. The insurance company normally have a claims team in-house or who they use to deal with the case on a landlords behalf taking most of the stress away. You will need to check individual clauses on individual insurance policies to see what is and isn’t covered.
Thanks for reading and if you have any other property related questions please don’t hesitate to get in touch with us – we’d love to help you.