Landlords - Buildings Insurance
Re-Build costs - not market valuation. It is essential that your
property is adequately insured. The sum insured should represent
the full RE-BUILDING cost of your property not its market value. In
some instances the re-building value will be considerably lower or
higher than its market value. Older properties in the lower priced
areas in the UK will cost much more to re-build that their market
value.
Almost 40% of UK properties are under insured, which means in the
event of a claim, insurers will not pay the full amount of the
claim. Ideally, to ensure you are not under-insured you need to
have a professional re-build cost calculated by a qualified
surveyor although some insurance companies will provide quotes
direct based on information provided; E.g. style, type, size,
condition, age, improvements, area etc. All buildings policies will
be index linked to reflect building costs increases annually. This
is only effective if the original valuation was correct to start
with.
Consent. It is essential that you advise and obtain consent to let
your property from your mortgage lender, existing insurer and head
lessee (for leasehold properties). Failure to obtain written
consent from these parties may render your insurance void in the
event of a claim. Sadly there have been many instances where
buildings claims have been totally rejected because the insurer and
or mortgage lender was not advised the property was let.
High Risk Tenants. Many mortgage lenders and general insures will
not grant cover if you intend to place certain categories of
tenants in your property i.e. Student, Multiple single sharers and
tenants in receipt of State Benefits.
Employers Liability. Usually buildings policies will provide an
element of Employers Liability cover. This covers claims for death
or injury to anyone you employ at your property i.e. a gardener,
painter etc. If you are letting to students or to tenants in
receipt of state benefit the university / local authority will
normally require a minimum of £5m cover.
Property Owners Liability. It is also essential that your policy
includes Property Owners liability cover to a similar limit to
cover injury, death or damage to individuals on or adjacent to your
property i.e. Postman, meter reader, council employee etc. Some
basic low cost polices do not include any cover.
Insured Events. The main insured perils which should be included
in the building policy should be:
- Fire
- Lightening
- Aircraft
- Explosion
- Smoke
- Impact
- Burst pipes or leakage of oil
- Storm or flood
- Malicious damage
- Subsidence
- Theft
Some policies will give the option of malicious damage caused by
the tenants - a valuable option for let properties.
Loss of Rent. Most policies will compensate you for loss of rent
following damage from one of the above perils if the property is
uninhabitable usually 20% of the sum insured but some policies are
up to 30%. (Not to be confused with Rent Guarantee policies - see
number 5 below.)