Q: MY NEW letting agent is assisting that I take out limited liability insurance as part of their terms of letting.

What is this and do I need it?

A: Insurance is defined by the Collins dictionary as ‘an arrangement in which you pay money to a company, and they pay money to you if something unpleasant happens to you, for example if your property is stolen or damaged, or if you get a serious illness'.

If we apply this to your tenancy then you can take out an insurance policy to cover your own items.

‘Limited liability insurance’ is an insurance policy which covers any damage which you may cause to your Landlords possessions/fixtures.

In affect this protects the purchaser (the “insured”) from the risks of liabilities imposed by lawsuits and similar claims.

It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy.

Over several years we have experienced times when tenants have acted in a non-tenant like manner and caused typically accidental damage during the tenancy.

A recent example was placing a hot saucepan onto a kitchen work top causing burning to the surface.

In this example the tenants did not have liability insurance so needed to meet the costs of repairs themselves.

If they had cover then they would have claimed under the policy though would have needed to pay an excess.

The amount of any excess very much depends on the terms of the policy, so a cheap policy with a high excess may not necessarily be good value for money.

So it is wise to shop around.

Some lettings agents or Landlords may insist on liability insurance within their terms.

However, this clause maybe seen as unreasonable.

The reason is that you could decide to insure yourself.

After all this avoids paying a premium and assumes you build up premiums over time to create a reserve for potential claims.

Though on the downside you may be taking too much of a risk if claims against you are high and you have little means of settling any claim.

Also be aware that any insistence on a policy does not have to be through the Letting Agent or Landlords preferred insurer as typically where they are the Letting Agent or Landlord maybe receiving commission on the policy they are selling you.

So it may not be the best policy for you. By all means ask if they are getting a cut.

Like any insurance, it is something that some will wish to take out for peace of mind, whilst some readers may wish to politely decline.

The choice is yours unless of course a policy is required as part of the terms of letting and you do not have the means to challenge the reasonableness of such a clause...

Please submit questions to Steven@sawyersestateagents.co.uk