In our previous blog, top 5 tips for buy-to-let success, we mentioned that houses with multiple occupants (HMOs) are the best and most profitable BTL you can invest in. But what exactly are HMOs? In the UK, a house of multiple occupancies is classified as a property leased out by three or more individuals who have no family relation.
When owning an HMO, you are renting to multiple tenants at once, which can open you up to more liabilities. Therefore having a form of HMO insurance will help protect you and the tenants from any unfortunate circumstances.
There are many types of covers to consider when selecting a suitable insurance policy. From liability insurance to protect you in the case of an injury claim by a tenant, to buildings insurance to cover damage caused by occupants, right down to contents insurance to cover things like fixtures and fittings.
Because it’s important to secure adequate protection for your property investment, we have listed a few of the policies we suggest when insuring your HMO.
1. Building Insurance
This policy will cover the financial cost of repairing an HMO property’s structural damage. This damage may be due to fires, water logging, weather, and the environment.
Additionally, other damage caused by accidents or malice on the part of the tenant may also fall under this bracket of insurance. This will need to be specified to your chosen insurer, and will most likely come at an extra cost.
2. Loss of Rent
Depending on the type of cover you have chosen, some insurances can cover the loss of rent. This is also highly dependent on the reasons for loss of rent, such as if a tenant has moved out due to a disaster like a fire or a flood. Once again you’ll usually have to choose to add it when you choose your respective policy.
3. Public Liability Insurance
Public liability insurance is a key component in most landlord insurance policies. If there is a claim for an alleged injury from a third party at your property, this cover pays for legal fees and compensation. For example, if a tenant tripped on a loose piece of flooring in the rental property and suffered an injury, you could be held responsible, and you could claim from your landlord liability insurance to cover the costs.
4. Contents Insurance
All HMO landlord insurance policies include the cover of your contents/belongings that you provide in the rental property. These policies will cover furniture, appliances, and any other items you provided your tenant against theft or accidental damage. If a tenant is wanting to insure their belongings within the rental property, they will have to take out their contents insurance.
5. Eviction Insurance
Some HMO Landlord insurance policies can cover some of the costs of evicting a tenant. This insurance can cover the cost of legal fees if you need to evict a tenant.
Finding the right HMO landlord insurance for an HMO may seem like a challenge, but ‘shop around’ before making your final decision. Get quotes from several insurance companies to find the one that offers you the best deal while covering all that you need protecting.