Landlord Insurance
The issue of landlord insurance is often viewed as a necessary evil and often judged solely on price. Recent research by Axa also suggests that as many as half of all accidental landlords have not changed their homeowner’s policy to a landlord policy – effectively leaving these landlords uninsured. Many did not realise that they required specialist insurance but a worrying 11% chose not to switch to a landlords policy, believing it to be too expensive,
The need to reduce costs has led to insurers controlling risks by increasing the number of Conditions or Warranties within the policy. A Condition is a clause within a policy that must be complied with; otherwise the insurers have grounds to avoid paying out against a claim because the contract has been breached. A Warranty is a clause that is worded so as to void the policy following a breach.
The recent floods in Boston showed that having landlord insurance is vital. However, with concerns over climate change and with more claims for flood and storm damage over time, reduced cover is going to become more prevalent.
What can you do?
Managing your properties properly is critical. Using your insurance policy to try to cover maintenance costs is always going to push up premiums as it leads to excessive numbers of claims and may even result in you being unable to get comprehensive cover at any price. It is possible to take out separate cover for boiler and heating breakdown as well as other services such as drainage, often referred to as landlord emergency cover through some utility companies and insurance providers.
EMPO (East Midlands Property Owners) recommend a number of actions you can consider to minimise your insurance premiums, many of which you may already be taking.
Tenants Checks
Always request references and make enquiries concerning any prospective tenant.
Never accept cash upfront as payment, as this is a good indication the tenant does not want the Landlord around to witness their intended use of the property. Examples of this kind of behaviour are sub-letting the property or using it as a cannabis farm with the resulting damage this can incur.
Inspection
Where regular inspections do not take place, damage to a property will not be discovered until sometime after it was caused. If, in the interim, the policy has been moved to a different insurer it becomes unclear which insurer the claim should be made with. Also, all insurance policies have conditions relating to the timeframe in which a claim can be made. Where the damage has been caused by the tenant, they may be reluctant to report it; if the damage wasn’t caused by the tenant, it would be unrealistic to expect them to submit a full report for an insurance claim – therefore regular inspections, with proper notice to the tenant, are important.
Weather
During cold spells care needs to be taken to ensure the property is heated, especially if you know the tenant is away. Alternatively, if the tenant is going to be away for a long time, turn off the mains water supply and drain the water to prevent burst pipes.
Flooding
Although insurers are broadly obliged to offer flood risk insurance at an affordable premium under the Statement of Principles agreed after the floods of 2007, they will still take steps to minimise risks. They have developed sophisticated flood mapping tools to analyse their exposure. Properties deemed at high risk face punitive claims excesses and conditions may be included in the policy to mitigate risk. You can help matters by:
Assessing your property’s flood risk by referring to the flood maps on the Environment Agency website. If your property is in a high risk area your insurer might ask you to fill in an insurance related request for information (IRR).
Consider taking flood prevention measures such as:
· Installing non-return valves on drain pipes
· Fitting flood barriers to doors and windows
· Installing self sealing covers on air bricks and vents
· Coating brickwork with a waterproof membrane
· Raising electrical sockets
· Tiling the floors in downstairs rooms
First published: March 2014
