Maintaining a reliable cash flow is imperative for any commercial or private landlord. Unfortunately, the majority of circumstances that lead to losses of rent are beyond your control – whether it's a fire, a flood, or a suddenly unemployed tenant.
Luckily, choosing the right landlord insurance isn't beyond your control. Here are a few of the key things to look for in an insurance policy, and how they can help to reduce the damage done if your rental income starts to suffer.
If a fire or a storm causes damage to your property that makes it uninhabitable for an extended period of time, you're going to need help twice – with both the cost of repairs and the loss of earnings while the property remains unoccupied.
Unfortunately, demands for your mortgage payments don't stop when your income does. So if you're a buy-to-let landlord with a mortgage to think about, it's especially crucial that you find landlord insurance that can help you through periods of loss of rent. In fact, some mortgage lenders may require that landlords have rental protection insurance in place, so check the details to ensure you aren't in violation of your agreement.
Rent guarantee insurance
While many insurance policies will include rental cover for periods of vacancy, not all of them will offer a guarantee against tenants who default on their payments . Despite your most stringent background checks and selection procedures, you might still be unlucky enough to suffer from a tenant who's either unable or unwilling to pay.
They might fall ill for an extended period of time, or they may find themselves unexpectedly unemployed. Their circumstances are outside of your influence, but you can at least seek specialist insurance to offer some protection against non-paying tenants.
However, there are stipulations to be aware of. Many policies will require that a certain standard of references and credit checks have been performed on a tenant, and may even require a specific type of tenancy agreement or a guarantor. There may also be a minimum amount of time that you have to wait between taking out the policy and making your first claim, and there's often an excess of one month's rent to pay.
If all else fails, and your rent arrears continue to build up, you may be forced to take legal action in order to protect your cash flow and your future. The right policy can help to cover legal expenses relating to repossession, eviction, damage caused by tenants or the recovery of rent arrears.
Some policies including cover of legal expenses will also provide access to a selection of solicitors offering advice and legal aid. But you may find that these policies will only cover your legal expenses if you hire a member of their own limited legal team.
It's almost inevitable that any landlord will experience difficulties with loss of rent at some point during their careers. But by choosing the right landlord insurance, you can hopefully mitigate the damage to your cash flow and your profession if you become the unfortunate victim of loss of rent.