Buy To let Properties Won’t Be Covered by Flood Insurance

Flooding has been in the news an awful lot recently. Tidal surges and heavy rainfall in many parts of the country has caused damage to life and property along huge swathes of the east coast and the southwest. Unfortunately for landlords, a change in the rules is likely to lead to

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a huge hike in the cost of insurance in flood risk areas.

Flood Re
The Flood Re scheme is being introduced by the government later this year. The idea behind it is to ensure all homeowners in flood risk areas can obtain affordable flood insurance. Customers everywhere will be charged a £10 levy that will be placed in a central fund. The extra money will then go towards subsidising claims from homeowners affected by flooding. In theory this is supposed to prevent the insurance companies from either refusing to insure flood risk properties or charging a small fortune to do so.

Buy To Let Excluded
There is currently a ‘statement of principles’ in place between the insurance companies and the government, which guarantees that owners of properties in flood risk areas are able to obtain insurance. The Flood Re scheme is designed to take over from this, but crucially for landlords, the new cover excludes business premises (including rental properties).

In effect, around one third of homes in the UK will not be protected by the Flood Re scheme, although the Association of British Insurers claim that commercial properties (including buy to let homes) will not have problems finding flood insurance cover. Whether this is true remains to be seen.