When landlords compare insurance quotations, the annual premium is often the first figure they notice. That is understandable: operating costs have increased, mortgage payments remain substantial and every property must earn its place within the portfolio.
However, the cheapest quotation may not provide the protection a landlord expects. A modest saving at renewal can become extremely expensive if an important risk is excluded, the excess is unaffordable or the policy limit is insufficient when a claim occurs.
The objective should not simply be to buy the lowest-priced policy. It should be to obtain suitable cover at a competitive price.
Are you comparing like with like?
Two landlord insurance quotations can look similar while providing very different protection.
Before choosing between them, compare:
- Buildings cover and the declared rebuilding cost
- Property owners’ liability limits
- Loss-of-rent cover and the maximum payment period
- Landlord contents cover
- Accidental and malicious damage provisions
- Escape-of-water and subsidence cover
- Alternative accommodation provisions
- Legal expenses and rent guarantee options
- Policy excesses
- Unoccupancy conditions
- Exclusions applying to particular tenants or property types
A lower premium may result from a higher excess, narrower cover or smaller claim limits. That does not automatically make the policy unsuitable, but the difference must be understood before a decision is made.
The rebuilding cost must be realistic
Buildings insurance is normally based on the cost of reconstructing the property, rather than its market value.
The rebuilding figure may need to include demolition, debris removal, professional fees and compliance with current building requirements. Rebuilding costs can change as labour, materials and regulatory standards develop.
If the declared amount is too low, the property may be underinsured. Depending on the policy wording and circumstances, this could limit the amount paid or result in a claim being reduced.
Saving a small amount by selecting an inadequate building sum insured is therefore a false economy.
Check the excess, not just the premium
The excess is the amount the policyholder must contribute towards a claim. Some policies have one standard excess, while different excesses may apply to escape of water, subsidence, malicious damage or other risks.
A quotation may appear attractive because it carries a significantly higher excess. That may be acceptable to a landlord with sufficient reserves, but it could make smaller claims uneconomic.
Portfolio landlords should consider how several excesses would affect their finances if more than one property were damaged during the same period.
Loss of rent can be crucial
Damage to the building is only one part of a landlord’s potential loss.
If an insured incident makes a property uninhabitable, rent may be interrupted while investigations, drying and repairs are completed. A serious escape of water or fire claim can take months to resolve.
Landlords should check:
- How much loss-of-rent cover is provided
- How the amount is calculated
- How long payments can continue
- Which insured events activate the cover
- Whether alternative accommodation is included
- What evidence will be required
A cheaper policy with limited loss-of-rent protection could leave the landlord paying mortgage and property costs without receiving rental income.
Exclusions become important at claim time
Marketing summaries describe the main benefits, but the detailed wording establishes the actual cover.
Common conditions may relate to:
- Periods when the property is unoccupied
- Inspections during an unoccupied period
- Minimum heating or water-isolation requirements
- The type of tenant occupying the property
- Houses in multiple occupation
- Renovation or building work
- Flat roofs, flooding or previous subsidence
- Security measures
- Maintenance and gradual deterioration
- Notification of changes in circumstances
A policy may be inexpensive because it is designed for a straightforward risk. If the property or tenancy falls outside that profile, the apparent saving may be meaningless.
Service also forms part of the value
Insurance is not simply a certificate purchased once a year. Its real purpose becomes apparent when something goes wrong.
Landlords should consider how a claim will be reported, what assistance is available and whether they will have support communicating with the insurer.
Clear provides in-house claims support for policies arranged through Clear. This does not guarantee that a claim will be accepted—the insurer makes decisions about cover and settlement—but it gives the landlord an experienced point of contact during the process.
That support cannot ordinarily be extended to claims under policies arranged elsewhere, which is another reason to consider more than the premium when selecting cover.
Portfolio landlords need a wider view
The cheapest individual quotation may not be the most efficient solution for a landlord with several properties.
A portfolio arrangement may provide more consistent cover, fewer renewal dates and simpler administration. It can also make it easier to review property details, sums insured, occupancy and claims history across the portfolio.
The correct option depends on the properties and the landlord’s circumstances. The important point is that the decision should be based on the overall risk, not one headline price.
Disclose the full picture
An inexpensive quotation is of little benefit if it was based on incomplete or inaccurate information.
Answer questions honestly and carefully. Disclose relevant details about the property, occupancy, tenancy, claims history, renovations and periods of unoccupancy. Tell the broker or insurer if circumstances change during the policy term.
Incorrect information may affect the insurer’s response to a later claim.
Ask what the saving removes
When one quotation is substantially cheaper, ask why.
The answer may be entirely reasonable. The insurer may have a different rating approach or may view the property more favourably. However, the difference could also reflect reduced limits, increased excesses or missing extensions.
The right question is not, “Which quotation costs least today?” It is, “Which policy provides suitable protection and dependable value if I need to use it?”
For help reviewing your landlord insurance requirements, telephone NetRent on 01352 721300 or email insurance@netrent.co.uk.
NetRent does not provide legal advice. This article represents our understanding of rental property law.