Taking out insurance on your property is an obvious choice whether you’re a homeowner or a landlord. Building insurance covers you if anything happens to the physical structure of the property itself – that is to say your bricks and mortar.
Most homeowners will also look to take out contents insurance, covering damage to their furniture or valuables. This type of insurance, while logical, is still optional. But when it comes to building insurance, many mortgage lenders often won’t approve a mortgage unless you have adequate buildings insurance.
In other instances, the mortgage offer will incorporate a buildings insurance policy. The lender is obliged to point out to the borrower that, whilst the holding of a buildings insurance policy will be one of the terms and conditions of the mortgage offer, the borrower is free to source a buildings insurance policy of their own, should they so wish.
Why is Building Insurance Important?
If your house burns down or there’s any structural damage, you’ll be covered by your building insurance. For landlords, it is essential to have building insurance to ensure your building is fully covered in the event of damage. Now there’s an important distinction here between buildings insurance, contents insurance and landlord insurance when looking at rented property, so let’s break those down.
The buildings insurance covers the structure itself, and claims will be made if there is an incident, such as fire or flood, where that flood causes structural damage. Again, if the flood damages furniture, carpets and personal items, then a claim would need to be made against contents insurance. It is incumbent upon the tenant, not the landlord, they have a contents insurance policy in place. Once again, these are always optional, but with policies starting at less than £20 a month, it’s easy to put a price on peace of mind.
Landlord insurance is in place to protect the landlord – not the tenant. Most landlord insurance policies cover a loss of rental income should tenants be unable to pay, but of course, there can be other circumstances where that same rent simply should not be paid to the landlord.
For example, if a tree smashes into your property during a storm, leaving it uninhabitable for several weeks, landlord insurance will only cover the cost of the loss in rental income, whereas building insurance will cover the cost of the repairs. If you rent, then it’s your landlord’s duty to take out building insurance. There are now a number of buy-to-let mortgages available from lenders who don’t insist upon buildings insurance as a condition of their mortgage, but not having it in place is just not a risk worth taking.
What Does Building Insurance Cover?
Buildings insurance generally covers the main structure of the property and will cover you in the event of a fire, water damage, collision damage – whether that be from falling trees or vehicles – be they on land or in the air. Policies can also include claims against acts of vandalism and oil leakage from defective central heating systems, as well as explosions caused by either gas or electrical faults.
This is buildings insurance at its most basic form, and many owners may think that this is sufficient cover. However, there are numerous claims which homeowners could not make because the damage occurred to a part of the property which was not considered part of the main structure.
Garages are often overlooked when not connected to the main property, but structural damage to a garage can lead to a costly repair bill, so it’s worth investigating how much more the premiums would cost if the garage were to be included.
Many insurance companies will not look at semi-permanent or non-foundation based additions to the home. Garden fences, for example, are typically not covered by insurance companies because they are far too often at the mercy of the weather, hence insurance companies would prefer to simply not cover them rather than factor in a hike in the homeowner’s premium, along with a very high excess charge for claiming against the policy.
What Won’t be Covered by Building Insurance?
All policies differ, but there are certain similarities between buildings insurance providers when it comes to those areas with which you would not be able to make a claim. Looking beyond the garden fence example provided above, problems like water damage caused by negligence would invalidate any claim. Let’s say that you have a shower cubicle where the screen door’s seal is no longer adequate. As a result, whenever the shower is used, there tends to be quite a lot of water on the floor. It’s irritating, but you’d rather not install a new cubicle; hence you simply mop up after every shower.
However, this water is getting under the floor in the bathroom and eventually that build-up of water leads to a leak in the ceiling of the room below. The repairs include drying out the area, replacing the shower screen, and replastering and repainting of the ceiling. Sadly, it’s unlikely that the insurance company will honour a claim here because there was a burden of responsibility on you as the homeowner to keep such problems in check.
Do I Have Enough Cover?
If you improve your building, you’ll need to increase the cover. If you are a landlord, arrange with your tenants for an insurance valuer to call and estimate the new insurance valuation. Make sure your building insurance is either index-linked to cover the rising cost of building materials or bedroom rated, which is automatically set at a higher level.
You should also factor in for the very worst-case scenario. If the property is uninhabitable for weeks or even months, then your tenants are going to need a place to live. You should check to see if your buildings insurance policy covers such expenses.
Ask the Experts
At Prideview Group we can secure excellent and competitive quotations for building insurance for landlords, plus walk you through all the terminology involved in taking out building insurance for your property.
Contact us today to make sure you’re covered for all eventualities.
