One quarter of landlords risk investments with wrong insurance

Statistics and Reports

One-in-four landlords are unwittingly putting their investments at risk by purchasing the wrong type of insurance.

A survey of 500 landlords by specialist insurance provider Simple Landlords Insurance found that a quarter of buy-to-let investors have mistakenly insured their properties with a standard home buildings and contents policy.

Landlords with single properties were most likely to purchase the wrong type of insurance, with 28% buying a standard home insurance policy. This could lead to the policy being voided and claims not being paid and several risks specific to rented property excluded from the policy, Simple Landlords warns.

Director of underwriting Tom Cooper says: “Those who have bought a home policy clearly want to protect their investments but have unfortunately mis-bought a policy that doesn’t give them the protection they need.

“A home insurance policy will not cover you for loss of rent, it will not cover you for legal fees in the event you need to pursue an eviction, and it may altogether void any claims you have to make. Any property is going to be the biggest investment you make – and not protecting that properly could cost you dearly.”

A further 3.5% said they didn’t have insurance and 4% weren’t sure if they had insurance or not, while 41% reported buying specialist landlord cover.

The remaining quarter of landlords could reduce their insurance spend by avoiding duplicate cover as 25% said they bought both specialist landlord and standard homeowners cover, suggesting they didn’t understand that landlord insurance also covers the risks to buildings common to both owner-occupied and rented properties.

Other insurance mistakes

Further savings could be made by shopping around at renewal, according to the research. Three-in-five landlords said they renewed their policy automatically because they were happy with the service or quote they had from their previous provider or because they forgot to look around.

However 20% of landlords who shopped around at renewal saved money by changing insurer. Others ended up sticking with their insurer because the potential savings weren’t enough to persuade them to change providers.

Most landlords said price was a very important factor in their choice of policy (86%), hotly followed by good cover in their policy (85%) and the availability of additional covers such as home emergency or malicious damage by tenants (70%).

Tom Cooper says: “High quality insurance, at the right level for your personal risk can help free landlords to diversify their strategies and think differently about how, when and where they invest.

“Whatever the reason, landlords – especially those with growing portfolios – are put off by the complication of moving their insurance. But it’s always worth shopping around to get the right cover at the best price, and the burden of administration is usually taken on by the insurer.

“Even if you’re not swapping, you should never accept an unjustified hike in price. Unless something has changed significantly at your property or you’ve had a major claim, year on year you shouldn’t be seeing your premium go up by more than about 5%.”

The full report can be viewed at www.simplelandlordsinsurance.com/emerging-landlord

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