In the current economic climate, there are more and more property owners who are renting their properties out in order to either cover their mortgages or increase their income. However finding suitable tenants can be difficult and despite obtaining references, vetting tenants and performing background checks, the upshot is that you can never be 100% sure that the tenants you are letting live in your property are going to treat it with respect. It is therefore vital that, as a landlord, you have landlords insurance in place. There are a number of reasons why landlords insurance is vital, here are the most important:
To Cover Property Damage
Some landlords, especially those new to the game, think that their buildings insurance will cover any damage to the property that might occur whilst tenants are living there. However this is not the case and buildings insurance is likely to only cover damage to the actual structure of the building such as fire damage and storm damage. In most cases, buildings insurance does not cover any damage that may occur to the interior of the property or to fixtures and fittings. Whilst the landlord will try to obtain any repair costs from the tenants if the damage was caused by them, this is not always possible. Landlords insurance covers you against this eventuality and allows you to get repair work done in the event of tenant damage.
To Cover Unpaid Rent
Another common reason why landlords get landlord insurance is to ensure that they can recoup any owed rent in the event that the tenants don’t pay it. Legislation in the UK actually makes it very hard to remove tenants from a property, even if they are not paying their rent. None or late paying tenants can cause cash flow problems for landlords. Insurance will ensure that the landlord receives money owing from rent.
To Cover Against Theft
If you are renting out a property furnished or with some fixtures and fittings in place, landlords insurance will cover the cost of replacing these items either at their full retail value or at a depreciated amount, depending on the cover of your insurance policy. Tenants might accidently or purposely remove items from the property that are not theirs and the landlord needs to be compensated against this in order to purchase replacement items ready for the next tenancy.
To Cover the Cost of Legal Disputes
In the event that a tenancy breaks down and the landlord and the tenants disagree over a matter of rent payments, theft, property damage or something else, the dispute might end up requiring legal assistance or a court case. These types of scenarios can prove costly so landlords should ensure that they are covered by obtaining landlord insurance. Such cover is likely to cover the cost of solicitors, legal claims and court appearances.
These are just some of the reasons why a landlord should get specific landlord insurance. However many financial institutions like mortgage companies and banks will require mandatory landlord insurance, especially for buy to let mortgage policies. This is to ensure that in the event that something happens during a tenancy, the landlord is still able to meet mortgage or other loan repayments that are secured on the property.