Protecting your property investment from financial pitfalls
NRLA insurance partner Rentguard explain the answers to commonly asked questions, to help you protect your property investment from financial pitfalls.
Our UK-based team regularly receives calls asking about the cover we provide and how landlords can keep their properties safe.
There are a range of factors to consider when it comes to owning a property, from the type of building to the renters who live there.
What cover do I need for a residential let property?
While there are no legal requirements for landlords to insure their rental properties, the terms of your mortgage may specify that certain types of cover are required. Some of these are the same types of cover that regular homeowners would consider, while others have landlords’ specific interests in mind.
The types of cover to consider for your residential let property include:
- Buildings insurance – Covers perils such as accidental damage, theft, vandalism, fire, and flood damage to the main structure of the property, including its permanent fixtures and fittings if they are your property.
- Contents insurance – Covers perils such as accidental damage, theft, vandalism, fire, and flood damage to contents that belong to you, are contained in the property or in communal parts of the property, are provided by you for use by your tenants or for maintenance of the property, and are detailed in the property’s inventory.
- Rent guarantee insurance – Covers your rental income if your tenants either can’t or won’t pay their rent, if they are facing financial difficulties, for example. This often includes cover for legal expenses incurred when evicting a tenant.
- Unoccupied property insurance – If your rental property is empty for a longer period than is covered by your general landlord insurance, then you may require unoccupied property insurance. This is typically a period of more than 30 days, for example if the property is empty due to renovations taking place, student tenants going home for the summer, or a gap between an old tenant moving out and finding a new tenant to move in.
- Tenants contents insurance – You may want to suggest to your tenants that they take out cover for their own belongings. Such a policy can be available for different residential tenant types, including students.
If you are worried about ending up with tenants who are unable or refuse to pay rent, then tenant referencing can also help to give you peace of mind. This usually involves a range of checks on tenants, including references and running a credit check to help determine their reliability, financial stability, and sometimes their reputation among previous landlords.
How much is landlord insurance?
The cost of landlord insurance can vary depending on a number of factors, including the provider, the value and location of your property, and the level of cover you choose. So, it’s a good idea to shop around and compare quotes to make sure you find a policy that suits your needs and those of your property.
Details about the property such as the number of bedrooms, how old the building is, the location, and any previous claims may be requested to help calculate your quote. It’s a good idea to have these details on hand when acquiring a quote to help make the process quicker and smoother.
At Rentguard, we search our panel of insurers to help provide you with suitable options, giving you the chance to compare landlord insurance quotes with ease.
What is the difference between loss of rent cover and rent guarantee insurance?
If you’re not being paid rent for whatever reason, there are different types of insurance available that can help. One is loss of rent cover, which applies when your tenants are unable to stay at the property due to an insured incident such as a fire. This is often included in a landlord insurance policy.
Rent guarantee insurance, on the other hand, applies when your tenants are still living in your property, but either cannot or will not pay the rent that is due. Such a policy can help to cover rent arrears and may also cover legal fees involved in handling the situation and evicting the tenant if required.
What's the difference between a property's market value and rebuild value?
A property’s market value is relatively simple; it is the amount that the property would sell for in the current market. When a homeowner is asked for their sum insured value or rebuild value, they may mistakenly assume that they can provide the market value, but this could leave them either over or underinsured.
A property’s rebuild value is important in the event your property is completely destroyed and needs to be rebuilt from the ground up. This takes into consideration clearing or demolishing any debris and building work remaining on the site, services such as surveying, labour and material costs, and even VAT paid on materials and services. The sum insured value is based on this rebuild cost and determines the amount you can receive in the event of a claim.
The market value does not usually equal the rebuild value because it is affected by other factors, such as the current state of the property market and the desirability of the area the property is in.
These two terms can be easily confused, but it’s important to get them right, so a professional valuation may be required to help you provide this figure as accurately as possible. Declaring the wrong value could leave you underinsured, meaning the cost of your claim might not be covered or you might not receive enough to cover the repair or rebuild of the property in full.
Am I still protected if the rebuild value of my property increases?
With so many different costs contributing to the rebuild value of your property, you may need to consider the effects of inflation and other factors on the rebuild value. As the cost of materials, labour, and services go up, so too will your rebuild value. This may be especially important during the current cost of living crisis. The BCIS House Rebuilding Cost Index shows an annual increase of 12.8% in the last quarter of 2022, with this figure peaking in the second quarter of 2022 at 15.3%.
Continuing to automatically renew your landlord insurance policy each year without adjusting your rebuild value could leave you at risk of underinsurance. To ensure you have a suitable level of cover, it’s important to inform your insurance provider and have your policy updated if the rebuild value of your property changes. Index linking could help to keep you covered by increasing the sum insured value in line with inflation when you renew your policy.
With Rentguard’s Landlord Insurance, the sum insured on the property will be adjusted in line with the Household Rebuilding Cost Index prepared by the Association of British Insurers. However, it’s still best to check that the sum insured is correct for peace of mind that you are suitably covered. Otherwise, you may not be able to claim the full amount needed to rebuild your property, should the worst happen.
Finding suitable protection can help you to avoid financial pitfalls as a landlord. If you have any questions about landlord insurance, you can call our team on 0333 000 0169 and they will do their best to help.
Help is at hand - get in touch with Rentguard
With vast experience handling insurance policies for a wide range of landlords, and with relationships with a number of leading insurers, Rentguard Insurance aims to simplify your insurance arrangements and help to protect your property, its contents, and your liabilities.
Get a quote online or speak to our specialist team on 0333 000 0169.
The sole purpose of this article is to provide information on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Rentguard and National Residential Landlords Association, an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.
National Residential Landlords Association is an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, which is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 7th Floor, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909. Rentguard is a trading name of Arthur J. Gallagher Insurance Brokers Limited.
