While many would agree that insurance is a sensible and prudent option, some potential buy-to-let landlords may not realize just how essential it is. Beyond the known risks of a burst pipe or a faulty boiler lurk some potentially nasty hazards. Some very much man made, others provided by Mother Nature.
Most policies cover the building and any contents, fixtures and fittings owned by the landlord. It does not cover those items owned by the tenant and so they would have to take out their own contents policy. There are many tales of unscrupulous landlords but the flip side of this is the tenant from hell.
Background checks, ID and employers references are sensible steps in ensuring that a tenant is bona fide but they are certainly no guarantee, especially not for someone with criminal intent on their minds. There are horror stories of supposedly respectable families signing up to tenancies to only then add locks to the internal doors and sublet the rooms whilst the owner of the house is abroad. Worse still there have been instances of disgruntled tenants trashing houses because they have been asked to leave after months of non-payment of rent. Windows have been smashed, bannisters hacked up, ceilings and insulation pulled down, carpets ruined and all other fixtures and fittings destroyed. While these are the exceptions it really highlights the need to not be complacent.
Landlord policies will also cover acts of God such as fires, lightning strikes, flooding, storm damage and even earthquakes. In addition to the standard policy there are usually optional extras such as rent guarantee insurance and alternative accommodation costs should the worst happen.
In addition to the safety net of insurance landlords can also protect themselves by employing a number of safeguards with regard to tenants. Creating lists that you give to tenants outlining that they must provide ID like passports, bank statements, employers references, references from previous landlords, credit checks and perhaps letting agency checks should one be used. To the dishonest prospective tenant this alone can be off putting and weed out the good tenants from the troublesome ones.
If things do go wrong, which they can do if you are renting multiple properties over an extended amount of time, then this is when prior preparation and your insurance come in to play. Tenants may not be able to pay, the washing machine or fridge might have packed up but at least you know you are covered.
The article was written by Steve Berry, an expert on landlord insurance and other buildings and contents related insurance.