Beware of landlord insurance shortfall

Buy-to-let investors could leave themselves open to substantial losses by opting for standard household insurance rather than policies designed specifically for landlords, buy-to-let specialist lender Paragon Mortgages has warned.

Most standard household policies are designed for owner-occupiers and can present some serious shortfalls for landlords and buy-to-let investors. These can include:

Unoccupancy: Ordinary household policies typically exclude burst pipes and theft cover if the property is unoccupied for more than 30 days. Longer periods of unoccupancy are comparatively rare in the case of homeowners, but for landlords that are carrying out refurbishment work or who may experience a void period, this time limit is far too restrictive.

Malicious Damage: Whilst a specialist landlord policy should cover malicious damage by a tenant, most standard household policies carry a specific exclusion. And if the property is badly damaged, standard insurance policies will cover the cost of alternative accommodation but will not necessarily cover the loss of rental income.

Legal Bills: Landlords could face a large legal bill if a tradesperson carrying out work to their property is injured. Homeowners can be held liable in these circumstances, and once again personal legal liability will be covered by their policy. But this important protection will typically exclude any liabilities arising in connection with the policyholder's trade or profession - not much use if you are a professional landlord. A specialist let property insurance policy should always provide public liability and ‘employers liability' in case the tradesperson happens to be employed by the landlord.

Tony Armitage, Paragon Insurance Director, says: ‘Landlords need to carefully consider their insurance needs and ensure that they are properly protected. Paragon customers have sophisticated insurance requirements for which a typical household policy is often unsuitable.

‘The biggest irony is that some landlords are actually paying through the nose for potentially unsuitable cover.'