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1.5 Insurance

Buildings insurance covers the risk of damage to the structure and
permanent fixtures and fittings of a building, for example, as a result of fire.
If the property is leasehold, then the freeholder will normally arrange the
buildings insurance and re-charge the cost to lessees.

Tenants are usually responsible for providing their own contents insurance
to cover their personal belongings. This is a matter for the tenants it is not
possible to require them to do this.

The landlord should take out contents insurance to cover loss or damage
to household goods that have been supplied by them, e.g. white and grey
goods, carpets, curtains and in the case of furnished lets other furniture
and fittings.

Insurance for rented property is usually more expensive than for owner-
occupied accommodation and insurance aimed at owner-occupiers will
not necessarily be suitable for rented property. The Association of British
Insurers produces guidance for owners which explains how insurers assess
risks and what can be done to secure cover. If the insurance company is not
informed that a property is occupied by tenants (instead of being owner-
occupied) this is likely to invalidate the insurance, and any claim made will
either be refused or any pay out will be reduced. Remember, that insurance
cover, like the mortgage, may come with conditions attached governing the
type of tenant that the property is let to.

There are special policies for landlords that provide cover for additional
risks such as the loss of rental income and the cost of temporary
accommodation where a property has been made uninhabitable as a result
of one of the insurable risks. Insurance can also provide additional cover
for the landlord in case the tenant is injured as a result of an accident in the
property together with other elements not necessarily covered by normal
householder insurance.

The insurance market is extremely competitive and it is worth shopping
around to find the best value for money. Landlords’ organisations often
offer lower cost insurance to members.

The tenancy agreement should take into account any implications of the
type of insurance cover there is: for example, if the insurance places an
upper limit on the cost of temporary accommodation it may be worth,
within the tenancy, limiting liability to the insured amount.