Insurance Guide

Immediately below is a guide for the various types of landlords insurance.

There are three types of insurance that concern a landlord. These are summarised below:-

Buildings Insurance
Most insurance companies offer the same sort of policy although many owner-occupier policies (particularly those arranged through your Mortgagor) are invalidated when tenanted. Buildings insurance generally covers fire, weather, malicious damage, burst pipes, impact, theft, damage to underground services and property owners' liability. Theft is restricted to fixtures and fittings and therefore excludes soft furnishings, televisions and videos etc. Loss of rent may also be covered for up to two years, although some policies only include this with contents insurance.

Buildings insurance is not a legal requirement however the enormous implications of a total rebuild means all landlords take up buildings insurance, even the largest. Economies of scale spread the risk of a claim across a portfolio of property insured under the same policy. This attracts reductions from insurers i.e the larger the portfolio the better the rate! Wren have for some time operated a large block policy for landlords and themselves with the Norwich Union. This extends to buildings insurance of £48.2M so in addition to obtaining a good rate we also receive a favourable service that benefits our clients.

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We will be pleased to better any other like for like quote for buildings insurance.

Contents Insurance
This offers the same cover as for buildings insurance except that it covers soft furnishings, carpets, electrical equipment etc. Far fewer of our landlords consider this necessary.

Rent Guarantee/Legal Protection/Rent Protection
This insurance is the most expensive of all types offered and varies from 2.5% to 6% of the GROSS monthly rent. This can cover legal costs in taking action against a tenant, debt recovery and the cost of alternative accommodation should a tenant refuse to vacate. For higher premiums rent arrears may be paid by the insurers and even repair costs can be insured.

We believe that your agent should seek payment of arrears and possession of a property if the tenant defaults and this is included within our management fee. Although we cannot offer any warranties, should a tenant default, an arrears letter is sent by the middle of the month, a notice seeking possession is then served after 1 month and a summons served within the second month. We do not charge the landlord for pursuing arrears except where court proceedings are commenced by our employed solicitor (in which case an hourly rate of £85 applies). We are usually able to recover the court and notice fees from the tenant. However a company cannot recover its time costs against an individual so this is usually lost. If a tenant continues to default the guarantor is then required to pay and proceedings are brought if necessary.

Many of our competitors do one of two things when a tenant defaults:
i) Send a letter, possibly make a chasing phone call and notify the landlord recommending legal proceedings. They then leave the arrears to external solicitors (who charge considerably more than £85 p/h) at your expense and wash their hands of the matter.

ii) Sell you an insurance policy (or include it in their commission) and refer it to the insurers when the tenant defaults, again washing their hands of the matter. It should be noted that these insurers pay the agent a return commission for the business that is organised by the agent.

For a property let at £500.00 per month with 3% insurance the annual premium is £189.00 including Insurance Premium tax of 5% each and every year! We do not recommend this insurance as 90% of tenancies are conducted satisfactorily, a further 8 % of tenancies can be settled with deductions from the deposit and most tenancies have a guarantor in case a tenant defaults.

The best option is not to let the defaulters occupy in the first place! Tenants' circumstances can change so we are unable to offer any warranties, however we do take responsibility for pursuing arrears if they occur. This means we take great effort to avoid them in the first place.

However should you wish to have rent guarantee insurance we can arrange it for you. You may prefer this option if you are a single unit owner, reliant on rent to pay your mortgage and unable to afford a rent void or wait for legal proceedings to obtain the rent. Similarly it might be appropriate if your property is in a poorer area as inevitably it may require poorer tenants to occupy it who are less able to pay therefore you may get more value for money for your insurance premium.