A vast proportion of UK landlords in the residential sector are putting their properties and finances at risk after failing to purchase adequate insurance on homes they are letting to tenants.
According to a recent report entitled, “UK Residential and Commercial Landlord Insurance 2016” over one third of such landlords (35.6 per cent) hold standard home insurance products instead of an official landlord policy, meaning they are underinsured and left exposed to certain financial risks, according to research by Verdict Financial.
The report, which covers both the residential and commercial property sides of the UK landlord market, states that the risks landlords leave themselves exposed to by taking out standard home building and contents policies include negligent behaviour of tenants, damage on the property, or unwarranted occupancy if the home is left vacant.
Thomas McCourtie, Analyst at Verdict Financial, says: “Insurers have a key role to play in educating customers about the necessity of purchasing insurance which corresponds to the intended use of the property. Quality checks can be implemented at the initial application stage or during the purchase process in order to identify properties that are to be let, and for the buyer to clarify which type of cover is required. This helps to ensure that the correct product is purchased.
“Given that rented accommodation has become the only real affordable option for many people, especially those living in large cities such as London, demand is high, and it is therefore important that the landlords supplying these properties are fully protected with the right cover. It also represents an opportunity for insurers to expand their coverage of the UK housing sector.”
In the UK, the landlord space has grown substantially over recent years with property owners capitalizing on the opportunity to generate additional income by renting out a property.
However, McCourtie states: “The market is ripe for change as the government considers introducing new rules and tax changes which could deter new entrants. Policy makers have questioned the stability of the market and, as a result, have sought to introduce tougher rules applicable to landlords, such as an increase in stamp duty on buy-to-let homes and stricter lending criteria.
“This will ensure the sustainability of the market, and that those taking out buy-to-let loans are fully capable of keeping up with repayments, especially if interest rates were to change.”