Don’t leave your rental properties unprotected, urges Lloyds

Living next to inconsiderate neighbours can be a nightmare, but letting to bad tenants can prove costly.

Investing in the private rented sector can be extremely profitable, but there are times when issues, which are simply out of your control, can take a turn for the worse.

If a tenant is not looking after the property or regularly failing to pay their rent on time, the experience can really make a landlord’s life unhappy and potentially turn your relationship with the tenant sour.

While measures such as credit checks and tenant referencing can minimise the chances of letting a property to bad tenants, there are no guarantees that what may appear to be a perfect occupant will not turn out to be a tenant from hell. 

Fresh research from Lloyds Bank Business Insurance Services highlights just how important it is for landlords to take out specialist insurance cover.

According to the study, 25% of tenants have damaged their landlord’s property accidentally, while a further quarter (25%) have caused blockages to sinks and toilets. Meanwhile, more than one in ten (12%) say they’ve failed to pay rent or bills, and a further 12% say they have smoked at their rented property, increasing the risk of fire and smoke damage.

Other things which landlords need to be aware of include tenants causing noise disturbance (10%), damage caused by pets (9%) and leaving the property unsecured and therefore at risk of burglary (6%). One in 20 (5%) say that their rental property has, in fact, been burgled while they’ve been living there.

The top five tenants’ confessions were:

1.    Accidentally damaged the property    25%

2.    Blocked the sink/toilet                         25%

3.    Smoked inside the property                12%

4.    Defaulted on rent/bills                         12%

5.    Caused noise disturbance                  10%

Damien McGarrigle, head of business insurance for Lloyds Banking Group, said: “The results highlight just how important it is for private landlords to have adequate landlord insurance which will protect them from a range of common problems, from break-ins and accidental damage to loss of rental income and plumbing issues.”

Regrettably, some buy-to-let investors do not always appreciate that being a landlord comes with added responsibility and expenses, which includes getting proper landlords’ insurance cover to protect themselves and their property.

Insurers offer a wide range of different property-related policies and so it is certainly not a case of one size fits all. But the only way landlords can properly protect themselves and their investment property against bad tenants is to take out appropriate landlords’ insurance that differs from standard home insurance.

Landlords’ insurance is a policy that covers a property owner from financial losses connected with rental properties. The policy generally covers the building with the option of insuring any contents that belong to the landlord that are inside.

The policy will normally cover standard perils such as fire, lightning, explosion, earthquake, storm, floods, escape of water and oil, subsidence, theft and sometimes malicious damage by the tenant.

Additional coverage might include accidental damage, terrorism, alternative accommodation costs, contents insurance, public, or landlord's liability cover, offering legal protection if tenants are injured, and crucially, rent guarantee and legal protection insurance.

“We know many small scale private landlords with just one or two properties rely on regular home insurance to protect them, but this often falls short of covering the specific problems they could face,” McGarrigle added. 

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