If you are a first-time landlord seeking building insurance for your investment property, you will need to take out an insurance policy especially designed for the buy to let market. The huge growth in the number of private sector landlords over the last 20 years, has created strong demand for specialist covers that protects rental property. In the United Kingdom buy to let insurance is sometimes referred to as landlord insurance. Both terms simply refer to a fairly standard building and contents policy, that has been especially written for property bought for letting purposes.
It is the condition of a mortgage that adequate building insurance must be in place prior to completion of a property sale. Buy to let lenders will insist on seeing a copy of the insurance policy document from the landlord, prior to the disbursement of the monies upon completion. This is to ensure that if tenants move in on the day following completion, and then accidentally burn the property down, the mortgage companies investment is protected from this and a wide range of other perils. Therefore you should check that any landlord policy you choose meet The Council for Mortgage Lenders' Handbook conditions. It provides detailed criteria regarding what is an 'adequate level' of cover required. Any mortgage linked to the investment property will need to have the lenders interest noted on the policy. Luckily insurance companies understand the range of perils, that need to be offered on a buy to let insurance policy to meet the lender's requirements, and most policies are fully compliant.
For most first-time landlords entering the buy to let market, the purchase of a buy to let insurance policy is an important decision. However most usually leave the shopping around process until the last-minute, in the weeks or days leading up to the exchange of contracts. From a business perspective it is completely understandable that most landlords are preoccupied with searching for the right property, securing investment finance and marketing the rental - all aimed to get the right type of tenants in as quickly as possible. However it is sensible to start obtaining insurance quotes during the property search process itself. Insurance companies are happy to diarise a future call back to finalise a previously discussed quote. However you will not be able to secure a confirmed quote without full property details.
If you are looking to buy and rent out an older property, you may want to obtain the surveyor's report to check if there are any issues which may impact your annual premium. Without all the 'underwriting questions' being answered, brokers or insurance companies may not be able to provide a complete quote, or may only be able to provide an quote based on assumptions which may need further clarification. A full surveyor's report will help to answer these questions. It will reveal an analysis of the type of building materials, the current state of the window and door locks, whether the building has suffered any subsidence in the past, and whether it is officially located in a flood zone. You may find that your quote varies wildly depending upon the level of detail you can provide your insurance company at this early stage in the property buying process.
Your choice of landlord insurance quotes may become limited, depending upon the type of tenant you are planning to allow into the property. When designing a buy to let policy, insurance companies analyse historical levels and costs of all insurance claims related to different types of 'classes' of tenants. As a result some buy to let insurance policies will have a higher premium for Houses in Multiple Occupation (HMO), DSS or Housing Association tenants and Students. Some landlords are quite happy to obtain rent directly from local authorities for these types of tenants. However most landlords don't want hassle or incur the cost of void periods, unpaid rent or legal costs associated with eviction proceedings. Consequently the majority of the one million landlords in UK, prefer to market their investments to professional couples. Working professionals can provide employment references and landlord references. The insurance company will want to know the occupation type of the tenants you plan to allow in to your property. Lastly if you are planning short-term lets or holiday lets, (resulting in the property to be left empty between tenants for long periods) - some insurers may refuse to provide an insurance quote altogether.
The price of your buy to let insurance quote will also be affected by the postcode of the risk address. All insurers rate their policies by postcode, according to well-known statistics of risk factors that have resulted in high numbers of claims for various perils. These factors may include the type of soil (which may cause subsidence damage in the foundations of buildings), whether the postcode is in a flood zone, burglary rates and so on. Another factor that will impact the price is the Building Sum Insured value. Your mortgage lender will provide you with this reinstatement cost, based on the valuation report. The higher the sum insured, the higher the quote will be.
Many landlords let their properties on a part furnished or fully furnished basis. So when you're discussing the sums insured with your insurance company, don't forget to discuss contents sums insured. Most experienced landlords realise that high levels of wear and tear and accidental damage, will mean that these contents may need replacing at some point in the future. As a landlord, you will not be able to claim for wear and tear. However you should also have an up-to-date (and independently verified) inventory of all items provided - including any receipts for large value items. This may help to resolve any possible disputes in any future claims process involving landlord contents. It is usually noted in most Assured Short Hold tenancy agreements, that tenants are responsible for procuring their own contents cover.
Most landlords are business minded and want the most competitive quote they can find. However this can sometimes be a bit of a false economy, if the buy to let insurance company does not payout in the event of a claim. So read and compare the Policy Wording and Key facts documents very carefully - to satisfy yourself that the one you end up buying meets your insurance needs. Check for the levels of cover provided, the levels of any policy excesses, the range of perils, the existence of any no claims discount and exclusions would not impact on future insurance claim.