How much are you paying for home insurance, and what can you do to reduce insurance rates? Insurance providers, much like the homeowners themselves, want less risk. In a sense, their confidence in the homeowner is reflected in the cost of the insurance premiums.
As such, anything you do to make your property more secure will contribute to lower premiums.
Take note: The two types of home insurance are Buildings Insurance and Contents Insurance. Building insurance covers the cost of repairing or rebuilding your home. Contents insurance covers the possessions stored in your home, including some you carry when you leave, such as smartphones.
When you purchase home insurance, you may choose to take out one or both of these policies. It’s usually a good idea to take out both in one package, so you pay excess on one policy instead of two. Excess is the amount you agree to pay on claims, with insurers covering the remainder. A reduction in expense for your insurer naturally means a reduction in rates for you.
Here are some factors that determine home insurance rates.
Your Security
A greater likelihood of a break-in means a greater likelihood of your insurer having to cover damages. Anything that makes your home more vulnerable or makes it a more attractive target is considered by insurers.
The better security you have in place, the less attractive a target your home becomes. Even if you doubt an alarm system or better locks can stop a determined burglar, every deterrent counts. Invest in a security system, install good-quality locks, and ensure your windows are made to a recommended standard. It may cost more initially, but you’ll be better protected and will save money in the long term by reducing home insurance rates.
Your Location
Some postal codes are more equal than others. It’s the reality, sadly. Though you have little control over what goes on in your neighbourhood, a spate of crimes increases the risk in the eyes of your insurers. It may not even be a “rough” neighbourhood, it may just be dumb luck. Whatever the reason, insurance premiums are bound to be affected.
Proximity to water may also lead to higher insurance rates for Building insurance, as it means a higher risk of flooding or water damage.
Pets
Insurers generally perceive pets as a risk factor. Your insurers could be the biggest dog lovers you’ve ever met, but it won’t change the fact that pets occasionally rip through furniture.
If you’re a pet owner, you know the importance of allowing your pet access to the great outdoors. A cat flap or dog door is a great pet accessory, but for insurers, it raises concerns, as criminals have been known to use them as points of entry. You’ll want to find out if a cat flap or dog door affects the premiums on your insurance policy.
The contents of your home
The ‘contents insurance’ element of home insurance covers the loss, theft or damage of possessions contained within your home, so if they are difficult or expensive to replace or more attractive a target for pilferers, it will affect your home insurance rates. Bear this in mind when it comes to valuables stored in your home, such as expensive jewellery.
The structure of your home
Anything that compromises the structure of your home, or makes it more susceptible to damage, will affect premiums when it comes to your building insurance package. The potential expense of rebuilding your home will also affect premiums. Variables such as the size of the property would factor into this equation.
Whether you live on the property
Insurers assume that a tenant, whatever the obligations of the tenancy, will not have as strong an incentive to keep a property in tip-top condition as the owner. So if someone other than you is living on the property, whether by business arrangement or not, you may have to pay landlord rates as opposed to those reserved for normal home ownership.
Your claims history
As with all insurance types, insurers will take your claim history into account when calculating your insurance premiums.
Energy efficiency is one of the most important issues of our time, and it’s an issue that the UK government takes very seriously. In 2008, legislation regarding energy performance certificates (EPC) gave landlords incentives to improve the energy efficiency of their properties. If you’re looking to get into the landlord business, you need to be familiar with this particular document and what it entails.
Here’s a brief overview of the requirements and ramifications of the energy performance certificate.
What is an energy performance certificate?
An energy performance certificate contains two key pieces of information about a property:
- The energy efficiency of the property. This is based on the amount of energy used per square meter of floor area, fuel costs, carbon dioxide emissions, and other variables.
Inspectors rate the overall energy efficiency of the property out of 100. However, the certificate will show a grade from A (the best rating) to G (the lowest). Currently, the average grading for homes in the UK is D or E. - Recommendations for improving the energy efficiency of the property. Some landlords voluntarily apply for an EPC because they believe these recommendations are genuinely valuable, as they identify structural issues and other factors that affect energy transmission.
Take Note: Landlords are not obligated to act immediately on these requirements. But prospective landlords should bear in mind that in 2018, new legislation will come into being that will prohibit landlords from renting out properties with a rating lower than E. Furthermore, as of April 2016, tenants living on properties rated F or G are entitled to request improvements from their landlord, which the landlord will then be legally obligated to carry out.
According to Property Investment Project, the top five recommendations for improving energy efficiency are as follows:
- Cavity wall insulation
- Loft insulation
- Thermostatic valves on radiators
- Low energy lighting
- Double-glazed windows
As you can probably tell, the majority of these recommendations point towards heating and cooling as the primary factors to address when it comes to energy conservation.
Who needs an energy performance certificate?
As of 2008, anyone looking to sell or rent out a property is required by law to produce an energy performance certificate. Owners and landlords must show the certificate to prospective buyers or tenants before the transaction is completed. Landlords must order a certificate before they can begin marketing a property.
The following property types are exempt from EPC requirements:
- Houses of worship, including churches, synagogues and mosques (sadly, a house where people watch football does not qualify)
- Industrial buildings
- Agricultural buildings
- Buildings scheduled for demolition
- Holiday accommodation that is rented out for less than four months a year
- Residential buildings that are in use for less than four months a year
- Buildings where alterations may cause damage to conservation sites
- Buildings with a total floor space of less than 50 square meters
How many certificates do I need?
You need just one certificate per property, regardless of how many landlords claim ownership of the property.
How does one acquire an energy performance certificate?
By booking an appointment with an accredited energy surveyor. A quick google search for surveyors in your county will turn up some names (just make sure the assessor has the necessary credentials; otherwise the certificate will not be valid). You can also use the useful register provided by Gov.uk. You will have to pay for the assessment, with average costs ranging from £50 to £100.
What is the penalty if you don’t have a certificate?
Failure to produce an energy performance certificate results in a fine of £200. Furthermore, as of October 2015, landlords who sign the tenancy agreement without being in possession of an EPC are in violation of the section 21 rules and will be unable to serve up the section 21 notice required to terminate a tenancy.
Who benefits from the energy performance certificate?
Tenants benefit as their landlords have incentives to improve the condition of a property. Landlords who play by the rules will benefit as energy performance certificates help weed out and punish rogue landlords. Finally, the environment benefits from less fossil fuel entering the atmosphere.
Universal Credit is rolling out across the UK, but not everyone is happy, especially landlords. The intentions behind Universal Credit (UC) are good. It replaces six different benefits and simplifies payments. It should also encourage recipients to learn financial responsibility. Unfortunately, the process is proving problematic. One of the biggest problems is late payments. Many tenants have fallen behind in their rent, and many landlords believe they have no choice but to exclude tenants from receiving benefits.
First of all, what is Universal Credit?
Universal Credit replaces six benefits:
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Income Support
- Child Tax Credit
- Working Tax Credit
- Housing Benefit
Full benefits are direct to recipients on a monthly basis. In the old system, housing benefits were paid directly to landlords. This offered a measure of income security. In the old system, benefits were paid weekly or fortnightly. Now, recipients have to learn how to manage finances over a full month. So initially, difficulties result in late rent payments or no payments at all.
Universal Credit and Landlords
The Money Advice Service recommends that landlords engage with their tenants either before they go on Universal Credit or as soon as possible afterwards. It’s important to be tactful but still emphasise their rent responsibilities and offer support or make use of the support system in the system. Monday Advice Service is also a Budget Planner to help people better manage their income.
Landlords can apply for an Alternative Payment Arrangement (APA), wherein they receive rent directly.
Being proactive is better than being reactive in this instance because the Department for Work & Pensions (DWP) has already earned a reputation for being less than helpful when it comes to dealing with queries and complaints. Tenants and landlords alike are frustrated by the bundles of red tape and apparently apathy by the DWP.
Landlords have to work twice as hard as before to sort out UC-related admin with the DWP because the process is more complicated, more labour-intensive and more financially punitive (according to the Residential Landlords Association). For example, if landlords want direct payments, they have to submit applications which go through the following steps:
- Referral: Self-referral (by tenants) and referrals by landlords and the Citizens Advice Bureau (CAB).
- Screening: ‘Decision makers’ decide if claimants are vulnerable enough to need assistance like direct payment to landlords.
- Decisions: The final decision on eligibility is made by a DWP staff member. Decisions are made on a case-by-case basis.
- Review: Direct payment is a temporary solution. Regular reviews determine the necessity of direct payment.
What landlords have to say
The Residential Landlords Association (RLA) has researched how landlords feel about UC and has found that, in general, landlords are frustrated with the system, particularly with the way in which queries are handled and the length of time it takes to process requests for direct payments.
Landlords say:
“The Universal Credit system is mysterious, unresponsive and devoid of communication.”
“The system whereby tenants get payment rather than the landlord is shambolic, universally disliked, makes tenants vulnerable to addictions and homelessness and prevents landlords from renting to people in receipt.”
“I will stop renting to people on Universal Credit as I won’t get rent to cover mortgage payments.”
Richard Jones, policy adviser and company secretary for the RLA, has acknowledged that while the DWP has worked to resolve some of the issues, there was still a long way to go.
Other findings
In December 2015, the National Federation of ALMOs (NFA) and the Association of Retained Council Housing (ARCH) released a report on how UC has affected tenants and landlords. Findings include:
- 96% of landlords ‘frequently’ or ‘sometimes’ didn’t get due notification of tenants going on UC.
- 90% of social tenants on UC are in rent arrears due to a 7-week delay before the first payment.
- 89% of all new UC recipients are in arrears.
- 82% of claimants say payments are ‘frequently’ or ‘sometimes’ delayed.
- 82% of claimants say the housing element of the benefit is ‘frequently’ or ‘sometimes’ incorrectly calculated or omitted.
- 34% of recipients in arrears were subject to APA – direct payments to landlords.