Landlords may lose almost half of annual rents to property damage

Landlords without insurance risk losing as much as 45% of their annual rental income through damage caused by tenants, specialist insurance provider Total Landlord said.

Figures from Total Landlord’s parent company, Hamilton Fraser, showed that while a vast majority of buy-to-let landlords have opted for landlord insurance, 15% of them have opted not to insure their property portfolios, leaving them susceptible to some hefty losses should their property be damaged.

The average annual cost of landlord insurance in England is £170 per property while the average annual rental income is £11,228 per property, which means the cost of insurance sits at just 1.5% of income.

Total Landlord said while uninsured landlords do make a marginal saving by not taking out insurance, they risk spending substantially more than 1.5% of their rental income if tenants cause damage to their property.

It cited as examples, among others, a kitchen fire and a bathroom flooding that could cost the landlord at least £5,000, or 44.5%, of the average annual rental income.

Eddie Hooker, chief executive at the Hamilton Fraser Group, stressed that even minor damage to properties is going to cost more than it does to take out an insurance policy.

“Should a major disaster happen, rental incomes can be severely impacted. A loss that many landlords would struggle to stomach given the challenges with profitability of a buy-to-let investment following recent and future government policies,” he said. 

Hooker pointed out that any rental property is likely to succumb to some level of damage during its lifetime.

“Although this may often be accidental, it can also be the result of a malicious act by a disgruntled tenant, in which case it can be far more costly. We’ve also seen an increase in adverse weather claims in recent years, which in many cases cause a great deal of damage,” he said.

“While the vast majority of landlords are insured against such damages, there is a small proportion who run the risk of remaining uninsured or, worse still, under-insured, which is quite astonishing given the relatively low cost of obtaining insurance in relation to the potential bill for damages caused.”