The sum insured should represent the full re-building cost of your property not its market value. In some instances the re-building value will be considerably lower or higher than its market value.
Older properties in the lower priced areas in the UK will cost much more to re-build that their market value. The Association of British Insurers (ABI) has a calculator on its website. It is essential that you advise and obtain consent to let your property from your mortgage lender, existing insurer and head lessee (for leasehold properties). Failure to obtain written consent from these parties may render your insurance void in the event of a claim. Many mortgage lenders and general insures will not grant cover if you intend to place certain categories of tenants in your property ie students, multiple single sharers and tenants in receipt of State Benefits. Usually buildings policies will provide an element of employers liability cover. This covers claims for death or injury to anyone you employ at your property ie a gardener, painter etc. If you are letting to students or to tenants in receipt of state benefit the university/local authority will normally require a minimum of £5m cover. Your policy should include property owners liability cover to a similar limit to cover injury, death or damage to individuals on or adjacent to your property ie Postman, meter reader, council employee etc. Some basic low-cost polices do not include any cover. Most policies will compensate you for loss of rent following damage from one of a number of perils if the property is uninhabitable usually 20 per cent of the sum insured. Contents Insurance Most specialist insurers will offer the option of a full contents policy or a limited contents policy. Most UK properties are currently let unfurnished or part furnished. A limited contents policy would typically give a fixed limit of around £5,000 of cover items such as carpets, curtains, light fixtures and fittings and kitchen white goods on a new for old basis. In addition to the normal insured perils most such policies will provide the landlord with employers liability and landlords liability in relation to the contents. Again these limits need to be adequate and at least £5 million. If your property is fully furnished or the limited contents would cost more than £5,000 to replace, you should have a full contents policy. You would normally select the sum you wish to insure for; again this should be adequate to replace all of the contents on a new for old basis. Rent guarantee insurance These policies are invaluable for most landlords. As a tax deductible premium this will guarantee you receive the rent you are expecting from your property regardless of your tenants personal circumstances, ability or willingness to pay the rent. If you have a mortgage on the property or have calculated your rental income verses your outgoings this will ensure you do receive your rent. Most such policies will include the legal expenses, as detailed above. You will receive your rent and the legal fees to obtain vacant possession will be covered. Policies will usually guarantee your rental for a fixed period, typically six or 12 months. Some policies will provide additional cover once you have obtained vacant possession until you are able to re-let your policy. The costs vary from a fixed cost policy or are commonly rated as a percentage of the annual rental figure, typically 3-4 per cent.
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Date: 1st, April, 2006 |
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