Guide to HMO Landlord Insurance

Introduction

Investing in a House in multiple-occupation (HMO) properties can be profitable, particularly in today's competitive rental market. Being an HMO landlord comes with some responsibilities and challenges. One of the most important points to remember when running an HMO is to get the correct insurance. This guide will give you the important information that you want to know about landlord HMO insurance. Below, we have explained why HMO landlord insurance is important, what it covers and how to select the best policy. 

What is an HMO?

HMO is a property where at least three people who are not family or partners live together and share a kitchen or bathroom. If there are five or more people, it is a large HMO. Furthermore, you need a licence from the council to run an HMO, which they will check often. Converting a single property into an HMO can make healthy returns to the owner. 
There are many things to consider before running an HMO. Give your tenants enough room space, use good facilities, and ensure safety. For instance, you need fire doors, smoke alarms, gas and electric checks, rubbish bins, enough toilets, and many more. In addition, your property insurance will also need to reflect how the building is being used accurately.

What is HMO Landlord Insurance?

HMO landlord insurance applies to landlords who rent multi-occupancy properties. The terms and conditions are slightly different from a standard landlord insurance policy. You will need to register your multi-occupancy property to obtain HMO landlord insurance. Subsequently, HMO landlord insurance covers property owners' liability, building risks and tenants' risks. Moreover, HMO landlords face difficulties with building and content damage, loss of rent, liability claims and theft.

What does HMO Landlord Insurance Cover?

Landlord insurance for HMO properties covers the risks associated with your property. These policies include building insurance and property liability insurance. 

When purchasing landlord insurance for HMO properties, you can choose coverage based on the risks you wish to protect against. Most landlord insurance policies include building insurance, fixtures and fittings insurance, and property owners' liability coverage. Furthermore, optional coverages that predict risks, like accidental damage, loss of rent and tenant default, are available.

Below are some of the main HMO landlord insurance coverage that can be covered in your policies.

1. Building Insurance

The expense of repairing structural damage to the HMO property is covered by building insurance. If the owner's property is damaged by a fire, flood, or vandalism, this insurance can help pay for repairs or rebuilding. If the freeholder is responsible for purchasing building insurance, you can only insure the fixtures and fittings.

2. Content Insurance

Content insurance covers the cost of common areas, such as reception areas and shared living areas. In addition, content insurance covers household items such as furniture and appliances if the items are robbed or damaged. Tenants' belongings are not covered by insurance.

3. Insurance for Public liabilities

Public liability insurance covers legal costs and compensation if a third party damages your property.

4. Loss of Rent Insurance

HMO landlord Insurance can cover rent loss, but it depends on the type of coverage you choose and the reason for the rent loss. Some insurance policies will reimburse lost rent if tenants are forced to leave the property. Rent loss isn't normally a standard feature of landlord insurance; you'll have to choose it when you purchase your policy. Moreover, if you've lost rent for another reason, such as renters failing to pay, insurance will be covered if you have a special cover, such as tenant default insurance, as part of your policy.

5. Fire Insurance

The landlord's building insurance covers if a fire damages your building. Your insurance will cover the cost of repairing or reconstructing it. Moreover, if your contents are damaged by fire, your insurance can cover replacing or repairing them. 

6. Water Damage Insurance

Generally, water damage is covered by landlord buildings insurance and landlord contents insurance. However, this will depend on the type of water damage. Flood damage is usually covered. Sudden and accidental water damage like a burst pipe would also be covered.

7. Accidental Damage

Accidental damage insurance covers replacing or repairing your rental property in the event of an accident. Damage, such as a spill of wine on your carpet or a hole in your wall during a DIY project. However, it must be an accident: if your tenant causes damage to your flat intentionally, your landlord's insurance won't cover it.

8. Eviction

If you have HMO Landlord insurance, it covers some of the expenses associated with evicting a tenant. As long as you include legal expenses insurance in your policy, it covers the cost of legal help. Moreover, some landlord insurance policies include legal expenses as part of their coverage, so double-check your paperwork if you have doubts.

You can cover many HMO properties with one policy and renew it simultaneously. This can make your work easier and your plans clear. You can also mix normal properties (business and home) with HMO properties in the same policy.

What is not Covered by HMO Landlord Insurance?

• HMOs with more than five tenancy agreements.
• HMOs with leasing agreements of less than 180 days
• HMOs rented to local governments by unknown tenants

Type of HMO Landlord Insurance

Let's explore the types of landlord insurance properties.

1. Standard Landlord Insurance

Standard Landlord insurance covers some of the coverage of your HMO property. But this may not be sufficient for your HMO property. You might need to add HMO-specific endorsements or get special HMO insurance for extra protection.

2. HMO-Specific Insurance

A dedicated HMO insurance policy is designed to meet the specific needs of an HMO landlord. Dedicated HMO policies typically provide more comprehensive coverage, including multi-tenant coverage and coverage for communal areas. These policies are designed to meet the risks of owning an HMO.

3. Rent Guarantee Insurance

HMO landlord insurance that includes rent guarantee coverage can be an add-on benefit to your portfolio. Rent guarantee insurance guarantees that you will receive rental income in the event of non-payment by your tenants. This is especially favourable for HMO properties with a higher turnover rate.

4. Legal Expenses Insurance

The costs of pursuing legal action against renters, such as eviction procedures or disputes, can be covered by this insurance. It's a valuable addition to your insurance plan for legal protection.

HMO Landlord Insurance Cost 

Landlord insurance can start from an average of £170 for a basic, no-obligation cover for buildings. Only coverage for a typical property in the UK with a rebuild cost of £200k, according to research from NimbleFins. Prices can fluctuate depending on rebuilding value, property type, year of construction, and optional extras.   Below are some sample rental property numbers about HMO landlord insurance costs.

The HMO landlord insurance cost is determined in part by the sort of building you own.

Factors to Consider when Selecting HMO Landlord Insurance

When choosing the best HMO landlord insurance, there are several things to remember. Below are some important points to consider. 

1. Property Coverage

Make sure the policy covers your HMO property. This includes the building, its contents, liability, rent loss, legal costs, and HMO-specific coverage.

2. Cost

Compare quotations from various insurance companies to select a policy that provides coverage and affordability. Moreover, remember that even the cheapest policy might not cover everything.

3. Policy Exclusions

Carefully review the policy's exclusions to determine what's covered and what's not. Ensure that you know any restrictions or exclusions that could impact your coverage.

4. Deductibles and Excess

Understand your policy's deductible and excess limits. A higher deductible can reduce your premiums while increasing your out-of-pocket expenses in the instance of a claim.

5. Claims Process

Research reflects that the insurance company has a commendable reputation in handling claims. A fast and effective process is necessary if you need to file a claim.

6. Customer Reviews and Ratings

Customer reviews and ratings can he in getting an idea of an insurance company's reputation and customer experience. A company with many positive reviews is believed to provide good service.

7. Regulatory Compliance

Ensure that the insurance policy meets all the legal and regulatory requirements for HMO properties in your area. Failure results from fines or penalties.

Suggestions for Managing HMO Properties Safely

HMO landlord insurance is important, but HMO property management is equally important to reduce risk and keep your rental business going. Here are a few advice for managing your HMO property safely.

1. Regular Inspections

Schedule regular property inspections to identify early maintenance issues and ensure safety standards compliance.

2. Safety Measurements

Install Smoke Detectors, Fire Extinguishers, and Carbon Monoxide Detectors in common areas. Make sure all safety devices are regularly inspected and maintained.

3. Tenant Screening and Clear Tenant Agreement

Seamless screen tenants to minimise the risk of problematic tenants. Review references, credit history, and prior rental history. Furthermore, ensure you have a well-structured tenancy agreement. That includes outlining tenant duties, rules for common areas and dispute resolution procedures.

4. Emergency Contacts

Give tenants emergency contact details for maintenance and repairs. In addition, make sure that tenants know how to get in touch with you in an emergency situation.

5. Regular Maintenance

Routine maintenance ensures that wear and tear is taken care of immediately. This satisfies your tenants as well as extends your property life.

Conclusion

Investing in HMO landlord insurance can be highly beneficial for property owners who have HMO properties in their portfolio. However, it comes with its own set of strange risks. HMO landlord insurance protects your investment and gives you peace of mind knowing you're protecting your property. Furthermore, you must understand the HMO property market well to run a profitable and secure HMO business in the current market with high competition. Select the appropriate HMO property insurance, and handle your HMO property proactively. Knowledge and preparation are the most useful tools for managing HMO properties. For student housing owners, amber is the key to connecting their properties with the millions of students around the world. So, why to wait list your property with amber today.