A house in multiple occupation (HMO) is an attractive investment with the potential to earn you a lucrative income. Whether you’re looking to buy one, already own one or want to convert an existing property into an HMO, you need to think about insuring it. You’ll quickly discover that standard landlord insurance, which is used for buy-to-let properties, isn’t suitable for an HMO. HMOs are considered to be a higher risk than buy-to-let properties and must conform to various legal requirements. As such, specialist HMO insurance is required.
At Trinity Finance, we are well-versed in arranging HMO insurance. Our mortgage and protection brokers ensure that the right type and level of cover is in place for your property. Your policy is individually tailored to reflect the unique nature of your property and the financial protection you require. Here, we’ll detail what HMO insurance is, what it covers, the types of HMO insurance available and its cost.
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What is HMO insurance?
Before explaining what HMO insurance is, it helps to define an HMO property. This is a property that accommodates three or more unrelated tenants who share facilities, such as a kitchen, bathroom and toilet. This is different from a buy-to-let property, which accommodates a single household. As a multiple occupancy household, an HMO poses certain risks. For example, multiple occupants sharing the facilities increase the risk of damage in comparison to a single household, which would be more likely to look after the home and its contents. There’s also an increased risk of fire and theft with an HMO. Therefore, you need specialist insurance that’s tailored to provide the right protection for the risks associated with HMO properties. To benefit from this insurance, you first need to register your property as an HMO.
What does HMO insurance cover?
HMO property insurance applies to different building types, such as conversions or purpose-built properties. You can insure an entire house or flat, a house that’s been converted into bedsits or a building that’s been converted entirely into flats (a third of which must have short-term tenancies). The cover also applies to different types of tenants, such as students, working professionals, tenants who claim housing benefit and asylum seekers.
As with standard insurance for properties, HMO insurance provides financial protection for the structure of the building as well as for any contents that you have left in the property. However, HMO insurance policies also tend to include property owners’ liability cover and unoccupied property insurance. As well as that, various optional add-ons are available too, such as cover for loss of rent, alternative accommodation, legal protection, accidental damage, malicious damage, employer liability and domestic emergency cover.
Types of HMO insurance
We’ll explain the different types of cover below, starting with the main inclusions.
- Buildings insurance: HMO buildings insurance financially protects you should your property be damaged or destroyed by unexpected events. These can include fire, flooding, storm damage, vandalism and theft, for example. The costs of repairs to the structure of your property, or even to rebuild it, are covered as well as those for the fixtures.
- Contents insurance: HMO contents insurance covers the cost of repairing or replacing any items that you’ve left in the HMO property in the event they’re damaged or stolen. For example, you may have provided furniture in each bedroom, left appliances for the tenants to use in the kitchen and provided furniture and furnishings in the communal areas. This insurance only covers your belongings in the property — the tenants need to take out their own contents insurance to financially protect their possessions.
- Property owners’ liability insurance: If a claim is made against you relating to an injury to a tenant or damage caused to a tenant’s belongings that falls under your responsibility as the property owner, this cover financially protects you. For example, a tenant may trip on some loose stair carpet, causing them to fall down the stairs and injure themselves. Property owners’ liability insurance will cover the legal fees and any compensation that has to be paid to the tenant.
- Unoccupied property insurance: This provides cover when your property is left temporarily empty. For example, if you rent your HMO property to students, they’re likely to go back home out of term time.
Optional add-ons for HMO insurance
Your HMO insurance policy can be tailored to meet your specific needs. There are various add-ons that you can include for more comprehensive protection.
- Loss of rent: If your property becomes uninhabitable as a result of an unexpected event, such as a fire or flood, this insurance covers you for the loss of rental income.
- Alternative accommodation: Should your property become uninhabitable, the costs needed to rehouse your tenants are covered with this optional extra.
- Legal protection: In the event of a property or tenancy dispute arising, your legal costs are covered. For example, you may have to seek legal help to evict a tenant.
- Accidental damage: Accidents happen and a tenant may accidentally break a window or spill wine on a carpet in your property, for example. With accidental damage cover, the costs of repairing the damage or replacing the item are covered.
- Malicious damage: This insurance covers the costs of repairing damage or replacing items that have been intentionally damaged by a tenant.
- Rent guarantee: HMO rent guarantee insurance covers the rental income if your tenants stop paying their rent.
- Employers’ liability: This insurance covers the legal costs or compensation payable if an employee becomes injured or ill due to the work they’re doing for you. You may employ a gardener, cleaners and someone to handle minor maintenance jobs for your HMO property, for example.
Landlord home emergency cover: If there’s a domestic emergency, such as the boiler breaks down, a pipe bursts or there’s a pest infestation, this insurance add-on provides emergency cover. You usually have access to a 24-hour helpline and an engineer will respond quickly to deal with the issue. The costs of the emergency call-out and repairs will be covered.
Get expert help with arranging your HMO insurance policy
Our mortgage and protection brokers are here to guide you on the different types of HMO insurance cover available. They can answer any queries you may have about HMO insurance, including how to work out the amount of cover you need for your property. They will check the standard insurance policy inclusions and advise you on the optional add-ons that may be beneficial to your situation. Your policy will then be tailored specifically to cover those risks and provide the financial protection you need.
At Trinity Finance, we can also arrange your HMO mortgage and advise you on the requirements for an HMO licence. Just give us a call on 01322 907 000 to speak with an HMO specialist. Alternatively, send an email to us at email@example.com or an enquiry via our contact form. One of our expert mortgage and protection brokers will reply to you as quickly as possible with more information relating to your HMO property.
How much does HMO insurance cost?
As HMO properties vary greatly along with the financial protection requirements of landlords, each insurance policy is tailor-made. This means that there’s no one-size-fits-all policy for HMOs and, therefore, no set cost. The cost of your HMO insurance policy will depend on various factors, such as the size and age of your property, where it’s located, the number of tenants and the type of tenants you’re renting to.
Can you benefit from cheaper HMO insurance premiums?
If you’re an experienced landlord – for example, you’re used to accommodating tenants who claim housing benefit – you’re likely to be offered a discounted rate by HMO insurance providers. This also applies to landlords who own multiple properties or a block of flats. You can arrange for multiple HMO properties to go on the same policy too, which will be more cost-effective than insuring them separately.
A factor that can increase your HMO insurance price is allowing your tenants to cook in their bedrooms. This increases the risk for the insurance provider. Therefore, to benefit from a cheaper rate, ensure that you provide suitable kitchen facilities for all of your tenants to share in the property. As this lowers the risk, it lowers your HMO insurance cost.
Do you need HMO insurance?
HMO properties come with a lot of risk so it’s important to make sure that you’re financially protected with the right insurance in place. When applying for an HMO mortgage, your lender will more than likely insist that you have an insurance policy for your property before they release any funds. Your property must be registered as an HMO otherwise your insurance policy may be invalidated. This also applies if an HMO licence should be in place for your property. If you make a claim and no valid licence exists when there should be one, your policy may be invalidated. Our mortgage and protection brokers can guide you on the requirements for an HMO licence. Another factor to be aware of is that many insurance providers won’t cover your property if it has been sublet. It’s essential, therefore, to ensure that your tenants aren’t planning to do this.
Financially protect your HMO property with the right insurance
Whether you’re a first-time landlord or an experienced landlord with an HMO investment portfolio, it’s important to be financially protected. Our mortgage and protection brokers – located throughout Kent, London and Edinburgh – can advise you on the types of cover available with HMO insurance. They can help you to choose the right level of cover for your property, both with the sum insured and the optional add-ons you may prefer to include. Your policy will then be tailored to meet your specific requirements. This will give you peace of mind that a financial safeguard is in place should something unexpected happen to your HMO property.
At Trinity Finance, as well as arranging the best HMO insurance, we can help with your other HMO requirements. Our mortgage and protection brokers can advise you on HMO licence regulations and arrange an HMO mortgage for you. They can also help you to understand the importance of checking for Article 4 directions if you’re thinking of buying a property to convert into a small HMO. If you’re not sure whether to invest in a standard buy-to-let property or an HMO, they can explain the pros and cons of each. Whatever you need help with, just give us a call on 01322 907 000 to speak with one of our expert advisers. If you prefer, send an email to us at firstname.lastname@example.org or an enquiry via our contact form. We will reply to you as quickly as possible with more information relating to HMO properties and their financial protection.
Yes, multiple properties can be insured on one policy. This will make it cheaper than insuring them on separate policies. You’ll also only need to deal with one insurance provider and deal with one renewal each year.
Yes, insurance providers allow you to pay for your policy in full or in monthly instalments.
Cover for malicious damage done to your property by one of your tenants isn’t included in a standard insurance policy. Therefore, to be insured against this, you need to take out additional protection in the form of malicious damage cover.
Whether or not you can make a claim depends on the reason for not receiving a rental income and the cover you’ve chosen to include in your HMO insurance policy. For example, your tenants may have had to move out of your property because it’s become uninhabitable. This could be because of a fire or flood, for example. In this case, if you’ve taken out loss of rent cover, you’ll be reimbursed for any rental income that you lose as a result of this. Another example is if your tenants fail to pay their rent. As long as you’ve taken out rent guarantee insurance, the rental income will be covered.