The right insurance protection is critical
Owners of let properties take considerable risk in renting to what are essentially complete strangers, and that risk is arguably greater when renting to beneficiaries of DSS housing benefits. Certainly, insurance companies view this category of renters as high risk, which is why many refuse to provide insurance to landlords with DSS tenants. That is not to say it is impossible to get coverage though, since there are reputable, established insurance providers who do offer DSS tenants insurance cover.
DSS housing benefits, now governed by the Department for Work and Pensions rather than the former Department of Social Services, are granted to low income individuals in the form of Local Housing Allowance (before April 2007 it was known simply as Housing Benefits). Private landlords who let their properties to tenants who have been referred through the DSS or local Housing Association are advised to defend themselves against potential property damage, rent loss and liability issues by obtaining specific landlords insurance for DSS tenants. The insurer will assess the tenant’s risk level and use that to determine the insurance cost.
DSS insurance, like any standard home insurance policy, will protect the property from structural damage caused by accidental catastrophes such as fire or burst water pipes so you, as the landlord and property owner, will not have to pay directly out of pocket for the necessary subsequent repair work. As an extension to the policy, it is also possible to add optional coverage for loss of rent should the damage from an insurance-covered event be so extensive that the property is uninhabitable.
Protection for contents inside a let property that belong to the landlord, such as furniture (if letting a furnished property), carpeting, curtains, bathroom fixtures and kitchen appliances, can also be included in DSS insurance policies. While an entire group cannot be stereotyped as all being bad tenants, and certainly receiving benefits does not automatically make an individual disreputable, DSS tenants do have a questionable reputation and a common problem landlords have reported experiencing with such tenants is mistreatment of property. So having the security of contents coverage is an important feature of DSS insurance.
Another important optional feature that can be included is liability coverage, which will protect landlords against any claims a tenant makes against them, for instance if a tenant suffers an injury caused by a faulty component on the property.
Unlike Housing Benefits that the DSS generally passed on directly to the recipient’s landlord, Local Housing Allowance is paid to the recipient, who is then responsible for using it to pay rent. Since income is an issue for DSS recipients, who range from single mothers whose first priority is to feed and clothe their children, people on disability with no working source of income, recently laid off professionals looking for a new job and people who have been unemployed for a while, even the most well intentioned of tenants may have trouble meeting their monthly rent payments, particularly since any difference between the benefit amount they receive and the rent amount has to come out of their pocket. To safeguard against this risk, DSS tenants insurance includes optional rent guarantee coverage, which landlords who rely on receiving regular monthly rent cheques should certainly obtain.
Landlords have an investment to protect, and it defeats the purpose of having an investment that is supposed to generate income if it starts costing more money than it earns. That is why insurance coverage is critical, and landlords need to ensure they obtain the correct coverage since if a property inhabited by DSS tenants is insured by a policy that is not directed specifically for DSS tenants, there could be problems in the long run when claims on the insurance need to be made.
Ladaniel McNaughton is a professional landlord and home improvement expert who has written prolifically on the subjects. His musing can be seen at Landlords Insurance, and overseas property insurance
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