Buildings & Contents Insurance
Buildings insurance is compulsory, and you must have it in place before a mortgage lender will advance the funds to you to buy a property. If you are an existing homeowner renting out your own property you must let the mortgage lender and/or insurer (if different) know, as the fact that a place is rented out can, and often does, render the existing buildings insurance null and void.
There have been cases where the insurer refused to pay out because neither they nor the mortgage lender had been told that a property was let.
Buildings insurance should always cover the cost of rebuilding the property were the worst to happen, rather than the actual market value of the property. A qualified surveyor can calculate the cost of rebuild, or alternatively you could consult the Building Cost Information Service at www.bcis.co.uk. The rebuild cost should include an allowance for an architect’s fee and surveyor costs, plus an additional 15% for clearing debris.
Perils Covered: The perils usually included in most popular building risks policies include: Bursts and Water leaks, Fire, Smoke, Storm and Flood, Subsidence, Vehicle Impact, Aircraft Damage, Lightening, Explosion and Malicious Damage.
Landlords could also take extra cover for the extra risks associated with letting, such as theft or malicious damage by tenants plus accidental damage (such as a tenant putting their foot through the ceiling via the loft).
If you own a leasehold property (most flats are leasehold), check with the property managers whether they already have buildings insurance. If they do, you may not need it.
Unlike owner occupied properties, landlords don’t usually need full contents cover. Your own home may be covered for anything from £35,000 worth of cover upwards. But in a rented property the tenant is responsible for insuring their own goods. However it may still make sense for you to take out limited contents cover.
Limited cover would typically include damage to or loss of carpets, furniture, curtains, white goods and electrical equipment on a new for old basis.
If you are letting your own home, fully furnished, then full cover would make more sense. Make sure you have a thorough inventory of your contents.
Specialist Lettings: Some tenants carry higher risks and some insurers are reluctant to cover such risks. For example, you may require a specialist insurer to cover students and Housing Benefit tenants or properties converted for HMO (House in Multiple Occupation). This type of cover will cost more than standard.