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What is Buy to Let Insurance UK?

The phrase Property Insurance has become very popular in recent years, although not strictly a type of insurance in its own right, it usually refers to Building & Contents Insurance for property purchased for letting purposes for a buy to let insurance uk. The policy is similar to the Building & Contents insurance you would purchase for your own home, the perils covered are almost identical but the policy is extended to give the correct liability cover for the property that is let out. Depending on who is advising you, you may find buy to let insurance is also called landlord insurance. If you want to take it one stage further there are a number of policies that could fall under the buy to let or landlord insurance heading and for your reference we list them below.

• Building Insurance
• Contents Insurance
• Legal Expenses
• Rent Guarantee
• Emergency Assistance

Building Insurance is the most popular contract taken mainly because it is a condition of your mortgage that you have this form of insurance in force throughout the period of your loan Lenders tend to follow preset conditions laid out in a handbook issued by the council for mortgage lenders so you are likely to find that who ever you obtain your Buy to Let mortgage from , they are all going to want a similar insurance product and to have their interest noted under the policy wording. This is made slightly easier for you as Insurers know that a certain range of perils has to be offered under a buy to let policy as if the contract doesn't meet up with the lenders requirement's, they simply won't lend you the money.

How is the Cost Calculated for Buy to Let Building Insurance? - As with any type of insurance, there are a number of “underwriting “ question that any insurer will require you to answer before you receive your quotation.

Type of Tenant - Different Insurers have a different approach to this but we have found that the majority operate three or four classes of tenant. The most acceptable form of tenant to an insurance company is a professional or working tenant. Some have higher rates for Students DSS or Housing Association. In some cases it may be a factor if the contract for letting is not between the landlord and tenant. If you building is unoccupied (as is frequently the case with new purchases, you should tell the insurer as this may affect your cover). Whoever you call for your quotation, be expected to be asked which group your tenant falls in to, although we doubt if you will be asked for a precise occupation. If you are operating a house in multiple occupation, you may find that the insurer will want to rate it on the most expensive class of tenant.

Risk Address - As with your own Home Insurance, insurers rate by postcode, Usually up to seven rating bands are employed with the highest rates reserved for those areas which insurers consider must likely to produce subsidence and in some cases flood claims.

 
Sums Insured - In all but one case we have found, you are free to choose your own sums insured and a “rate” is charged based on your sum insured. Buildings should be insured for their full reinstatement cost and if you have a mortgage of the property your lender will give you instructions as to the sum insured required If you do not have a loan on the property, we have found that the Association of British Insurers produce a good guide on their website. They have a program which, if you input the measurements of the property will calculate the rebuilding cost for you. Many Landlords do not bother to insure Contents but if you do, you should value them as new for insurance purposes. We have been unable to find any insurer offering Contents Insurance for Landlords on any other basis.

Previous Claims -Any previous claims, whether insured or not should be advised to the insurance company, if you have had a claim at your own home or other rental property you should also notify this although from our inquiries this did not seem to impact on the premium.

General Questions - The questions asked by insurers are fairly similar, although slight differences were found. You will be asked to confirm that your property is in a good state of repair and confirmation that it is not located in an area that suffers from flooding or subsidence.

How to I obtain Cheap Buy to Let Insurance? - Buy to Let Insurance is a lot cheaper now than several years ago as many more insurers are wanting to sell the product. In simple terms the only way we have found to reduce your premiums is to phone around and make to make sure you are getting the best deal. Consider using the services of a broker as they may have access to more than one product and in effect will do your shopping around for you. Ultimately though, you will have to satisfy yourself particularly if you are looking for the cheapest buy to let insurance. Remember though, sometimes the cheapest is not the best, you should study each insurers Key Facts document to see the extent of the cover being offered to you. Compare the excess ( the first portion of the loss that you will be responsible for) between policies and if you are in any doubt, ask questions or request to see a full policy wording before you accept cover.

The Buy to Let Market - there are many buy to let mortgages on the market and professional help should be sought to obtain the right deal for your personal circumstances. Once you have obtained your buy to let mortgage, the lender will want you to arrange a buildings insurance ( you may add contents cover to this policy if you so wish). This form of policy is often referred to as a buy to let policy or buy to let buildings insurance, in fact it is really only a form of the buildings policy you would expect to obtain for your own home. The range of insurance perils covered is similar to your own home insurance and your lender will insist that the cover satisfies the council of mortgage lenders handbook conditions., This handbook defines a list of perils that must to covered prior to any loan advance secured on the property. Typical perils covered under a buy to let policy will be Fire, lightning, earthquake, storm, tempest, flood, subsidence, landslip, heave etc. As well as these standard perils, your buy to let insurance will also provide loss of rent cover. Loss of rent cover under a building policy only provides cover for rent you are unable to collect following an insured peril at the insured property. It does not cover tenant failure to pay the rent and this must be covered under a separate policy.

  
As well as loss of rent, a buy to let buildings policy will also include property owners liability cover which will cover your legal liability for claims arising out of your ownership of the building. If you have supplied contents with your buy to let, you will need to obtain a separate or combined policy as this will then provide you with the necessary liability cover attached to your ownership and supply of the contents.

 
Often confusion arises as to when you should have you buy to let building insurance policy start, unless directed otherwise by your solicitor, it should start from the date you exchange contracts. From this date , you are legally obliged to insure top purchase the building and thus it is advisable to place insurance. One of the most common delays in mortgage lenders releasing funds for buy to let purchase, relates to the issue of insurance policy documents Lenders always like to see a copy of the insurance policy schedule with confirmation that all of the standard set of perils are covered. They also like to see their interest noted on the policy schedule , this is to satisfy the contract rights act which states that anyone having a financial interest in an item, needs to be noted on an insurance policy schedule if they would expect to receive indemnity form the policy in the event of an insurance claim.

 
Although you can obtain buy to let insurance relatively easily and cheaply, not all insurers are able to issue immediate policy documents. Always contact a broker or intermediary well in advance, to give them time to prepare your policy documents.