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01294 461911


Property Insurance

Tuesday, 8th April, 2014

Your property is a substantial investment and it is imperative that you have the right level of cover in place to protect this investment.

In today's current economic climate there have never been so many people wishing to jump on the buy-to-let band wagon without fully taking into consideration the scope of associated risks.

First and foremost, landlords should ensure that the policy they purchase is specifically designed for landlords rather than regular home owners. Essential risks to cover are fire, flood, storm, malicious damage and public/property owners' liability. Comprehensive cover will effectively insure all catastrophes that might significantly affect your property and your tenants.

In recent years we have seen a significant rise in malicious damage claims caused by the tenant. Such claims can be expensive to rectify but depending on the amount of damage caused it can also take many months to reinstate the property into an acceptable condition. The majority of standard insurance policies exclude cover for malicious damage by the tenants, and without the right cover in place, the cost of this damage would have to be borne by the landlord.

Many insurance companies also hold a zero tolerance policy on unoccupied properties. This means that if an escape of water claim occurs whilst the property is untenanted and unoccupied, without notification to insurers, the claim would not be paid and the landlord would incur the cost of repairs.

Whilst the price is an important factor during these financially difficult times, it is recommended that landlords fully understand the policy they are looking to purchase, as a short term gain, could lead to long term financial burden.

Aside from the "standard perils" of fire, flood, storm etc. when looking for insurance cover the important extensions to consider include:

Malicious Damage and Theft caused by the Tenant
Damage to the property caused by the tenant is a frequent problem experienced by landlords, ranging from a broken window, a trashed property or deliberate theft. Even when a deposit has been taken (and protected) it will rarely cover the cost of most of the damage, for example the devastating costs when it comes to cannabis farms. Many specific buy-to-let insurance policies exclude this particular risk, and those that do, often only protect against malicious damage caused by a third party, like a brick through the window, not damage caused by the tenant.

Theft of Keys
Replacing a lock and having extra sets of keys made for more than one tenant in the property can add to a costly bill.

Loss of Rental Income
All specific buy-to-let policies should offer Loss of Rent as standard and the level of cover is generally set as a percentage of the buildings sum insured. Look for policies that provide at least 20% or 30% of buildings cover. Loss of Rent claims are only considered if the loss of rent is related to loss or damage to the buildings, caused by an insured peril.

Public Liability
Letting out your property is never going to be a risk free business and the legal responsibility for loss or injury sustained, or even the death of a third party resulting from the occupation of a building, is yours. Whether you are letting out a single property of a portfolio you need to ensure you have the right cover in place to avoid potential legal action against loss of earnings, future loss of earnings, damages awarded to the claimant, defence costs or the claimants' legal costs if you are at fault. Providing you have met the terms and conditions of your policy, both the cost of representation and any costs awarded will usually be met by your insurers.

Employers Liability
If you always pay an independent agent, such as a letting agent, to manage your portfolio, it is unlikely that you will need this type of insurance. However, if you manage your own portfolio and directly employ people in this management process, you are obliged to take out this type of insurance. Remember, in civil law, self-employed people who carry out work for you and no other, will almost certainly be considered as being your "employees" and you must insure them as such.

Cover During Void Periods
It is a common occurrence for Landlords to experience periods where the property is vacant and therefore unoccupied. Most policies only provide limited cover during these periods or where they do provide cover it is for a limited time. Look for policies that will provide full cover for up to 60 or preferably 90 days of the property being unoccupied. A word of warning, however, if you are planning to undertake refurbishment during these unoccupied periods, you must inform your insurer. Remember, if you own the building, it is important not to overlook furnishings in the common parts of premises. Obviously, it is the responsibility of the tenant(s) to insure the contents that they own. The perils included are similar to those covered under the buildings insurance but accidental damage is generally included.

This important cover will be excluded from your buildings insurance although some policies will allow you to include terrorism cover to your policy at a cost. This will provide you with additional protection against damage to your property from acts of terrorism.

For a no obligation buildings insurance quotation please contact Cunninghame Properties by telephone on 01294 461911 or by email info@cunninghameproperties.co.uk.


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