Landlords Losing Sleep Over the Housing Market

11-Sep-2009

New research shows that buy to let landlords are still very much concerned about the current state of the housing market.  The research by Direct Line for Business shows that one in five landlords surveyed are particularly worried about their cash flow, with around 30 per cent concerned with 'rising interest rates' and how a further increase would affect their businesses.

Worryingly, nine per cent of landlords included in the survey have cancelled insurance policies as a way of saving money, leaving themselves and their tenants more exposed to financial risk in the event of market-related difficulties.  A lack of suitable cover can have a number of implications for both landlord and tenant, so this is one area where cost-cutting is to be strongly discouraged. 

Landlord insurance is also known as buy to let insurance, property owners insurance or rented property insurance.  The most basic level of landlord insurance would cover the property owner from financial losses incurred as a result of renting out their property.  This cover protects the building itself from damage (for example, by fire, damage caused by extreme weather conditions such as lightening, flooding and storms, malicious damage or subsidence.  Additional insurance can then be taken out to cover the fixtures and fittings and the contents of the property, particularly suitable if you are letting out a furnished property.  Tenants would usually be required to insure their own belongings with a home contents insurance policy.

As well as covering the landlord against damage to the property, landlord insurance plays an important role in protecting both landlord and tenant(s) against financial difficulty, making it an essential product particularly in economic climates as uncertain as these.  Property Owners Liability cover  (also known as Public Liability cover) should always be included within a landlord insurance policy, because when you rent your property out you take responsibility for the safety of the property and any building or maintenance work carried out on the premises. 

For example, if tools equipment used in essential repair work to the property caused injury to your tenant or anyone else, the injured party could claim for sizeable compensation that would have to come from your own pocket unless you had adequate insurance.  On the other hand, pursuing costs for damages caused to your property can be an expensive undertaking, and a comprehensive landlord insurance policy should cover the legal fees of this.

An aspect of landlord cover that is crucial in times of financial uncertainty is Rent Guarantee insurance.  Unfortunately, when you rent a property, there is always the possibility that your tenant will not pay their rent.   They may lose their job and therefore the means of paying you, they may withhold the funds due to a dispute or simply refuse to leave the property once evicted.   Whatever the reasons, the effects of a sudden halt in your rental income can be extremely damaging for you, especially if you are left out of pocket with mortgage payments to meet.  Rent Guarantee insurance pays the rent for you in this event, although the length of time the rental payments are covered will depend on your insurance policy.  Click here to take out a landlord insurance policy or find out if you could improve on the cover offered by your existing policy.