Everything You Need to Know About Property Insurance

It’s something that can often be overlooked during the property investment process but property insurance is a key part of looking after yourself and your asset. Here we go through everything you need to know about property insurance.

What is Property Insurance?

By and large, property insurance is an umbrella term for policies that either protect the asset or cover liability for the property owner.

Property insurance will financially reimburse the owner of a structure in case there is damage or theft, while also reimbursing people that may sustain an injury while on the property. 

There are a number of different policies that can be taken out but the common types investors may come across are the following: Landlord Insurance (which includes building insurance, content insurance and public liability insurance), Landlord Emergency Cover and Rent Guarantee Insurance.

Personal property is not usually covered as renters will take out a policy of their own.

How Does Property Insurance Work?

As with most insurance policies, you will pay a regular premium that covers you in the event of damage to the building.  

Some of the problems that property insurance covers include damage caused by fire, smoke, wind and other extreme weather conditions, vandalism and theft.

Landlord insurance – the most common form of insurance for a Buy-to-Let – can be a condition of the mortgage. You can typically choose your own insurer and it’s commonly done at the point of contract exchange. 

If you’re a leaseholder, you may have building insurance included in the lease or the freeholder may already have a policy and charge you for it.

While landlord insurance isn’t always a legal obligation,  a standard home insurance policy won’t typically cover Buy-to-Let activity. This is when you’ll need a lender that can offer more specialist products before you can take on any tenants.

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Everything you need to know about investment finance, all in one place.

Get the lowdown on how you can start planning your investment finance, or if you’ve already started, what you need to know about upcoming changes:

What is the Right Finance Option For You? – We break down how investors commonly finance an investment and how you can do the same.

Stamp Duty Land Tax Update – What changes have been made to Stamp Duty Land Tax and how will they affect your investment financing?

Overseas Investment Financing – Investing from overseas? Here’s the things you need to consider going forward.

Stamp Duty Financing Illustrations – Get your free breakdown of the figures behind the latest Stamp Duty Land Tax changes.

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What Property Insurance Do I Need?

If you’re letting out your property, it’s important to check how your building insurance and landlord insurance will co-exist during the investment. Usually, you’ll need to take out a specific landlord insurance policy and that will likely include building insurance, keeping you covered. In some cases, you may be able to amend existing building insurance to cover any rental activities. 

Finally, if you’re letting an apartment, there may be some extra steps in the process. Make sure to check your lease or speak to the freeholder regarding the Building Insurance for the property. 

You may still choose to take out private insurance for things like contents and public liability to be safe. If you’re organising the building insurance, make sure that you get a policy that covers Buy-to-Let activity specifically.

As a landlord, it’s important that you protect yourself, your investment and your tenants. If you’re looking to build long-term growth through a UK property, ensuring you have the best insurance can mitigate any challenges down the line and ensure you’re building consistent wealth. As always, speaking to a trusted partner can be incredibly useful in ensuring you get the protection that you need.

How Much Building Insurance Cover Should You Opt For?

It’s fairly standard practice that a landlord insures themselves for the amount it would cost to completely rebuild the property – the sum insured.

The cost of rebuilding a property is not the same price that you purchased for – it’s usually under the current market value.

While some policies will work out the sum insured based on where you live and the type of property you have, some will offer unlimited cover. As always, if you know the rough rebuild costs, it can pay to shop around so you can find something to suit your exact needs.

Remember, if you improve your home, such as adding an extension, the rebuild costs may also increase and you will need to make sure you’re covered

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What is Landlord Emergency Cover?

A useful policy type for ‘hands-on’ landlords, this type of insurance will cover emergency repairs to the property that could be highly detrimental to tenants, such as: plumbing, electrics, boiler repair or infestations.

With landlord emergency cover, insurers will usually provide tenants with a 24-hour direct line that can be passed on. This can be useful as tenants can handle issues themselves and can save the landlord time and energy.

Rent Guarantee Insurance

Mainly used by Buy-to-Let landlords as you’d imagine, Rent Guarantee Insurance covers the rent if a tenant defaults on a payment.

While we always suggest performing the necessary research on tenants – including gathering references – defaulting on payments can happen at any time and an extra level of protection never hurts.