Many people are not aware that when letting your home or any other property to a third party you are normally obliged to at the very least notify the lender and amend your insurance cover accordingly.
‘Buy to Let’ insurance is designed to specifically address the different risk profile associated with letting a property rather than occupying it yourself as the homeowner. It will usually have different insured risks and requirements you need to fulfill. Many buy to let policies will include or offer as an ‘add-on’ other insurances such as public liability cover for common areas, void cover, legal expenses cover or, vacant property cover (or restrictions).
As with all insurance, the best way to reduce premiums is to mitigate risk. Here are just a few ways you can do this:
- Buy in a low risk area. Obvious perhaps, but insurance premiums reflect the likelihood of a claim. Low crime areas or areas outside of flood plains will be less costly to insure.
- If you have more than one property consider portfolio insurance. Effectively, you give all your business to one company and in return they give you a deal. There is also something to be said for reducing risk by adding more properties. The chances that you are going to claim on every property every year are low.
- Don’t claim! OK, it might sound silly, after all, this is why you are insured – for instances when you need to claim. But sometimes a small claim is just not worth the hassle and the cost in rising premiums. Be pragmatic.
- Increase voluntary excesses. As with (3) above, this might involve you in more costs if and when you want to claim, but it’s usual that a rise in the excess (the first amount of any claim that you are required to cover yourself) will help reduce your premium.
- Shop Around! Every year, do it. Insurers do not usually reward loyalty. You need to shop around every year and see what offers are available. Also, consider discounts offered by people that insure other parts of your life like car insurance, etc.
- Make sure you properly estimate the property’s replacement cost and (if applicable) the value of Landlord’s contents. But make sure you don’t under insure because this can cause real problems if you need to make a claim.
- Make sure your home is secured properly with good window and door locks, burglar alarms, security lighting, etc and consider installing fire detection and prevention measures. It’s likely you will have to install smoke and gas detectors in any event. At least your insurance premium reward your due diligence.
- Choose your tenants wisely. The more transient and financially unstable your tenants the more risk their occupation is perceived to pose. Students, multi-occupancy lets and benefits claimants are not tenants that will help reduce your insurance premiums.
- Keep the place well maintained. As Landlord you need to understand the difference between an insured risk and wear and tear. You aren’t covered for the latter. If you keep the fabric of the property in good order you’ll incur less costs later (such as water from a leaking roof) and if the roof does get damaged in a storm a Landlord that can illustrate a history of regular maintenance and good property husbandry will have a much easier time during the claim process.