Letting agent insurance

by Readers Question

8:27 AM, 6th August 2014
About 4 years ago

Letting agent insurance

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Letting agent insurance

Recently I have set up a limited company as advised by my accountants to front my rental business. Basically we own properties personally, which are rented out through the company. Letting agent insurance

The houses themselves are insured by me as an individual, hence I only need insurance to cover the company operation.

On searching for insurance I have received quotes ranging for £44 to £244 and don’t really understand what level and type of cover is needed.

Can someone please advise of what level of insurance I need and where to purchase it at a competitive price?

Many thanks advance!

Ivan



Comments

Mark Alexander

8:31 AM, 6th August 2014
About 4 years ago

Hi Ivan

If the company will only be letting properties which you own personally then I don't see what additional risks and perils you would want to insure yourself against. It's not as though you would be able to sue yourself for negligence is it? LOL

On the other hand, if you intend to manage properties for third parties then that's another scenario entirely/

Please confirm which of the above it is.
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Yvette Newbury

21:23 PM, 6th August 2014
About 4 years ago

Hello Ivan, out of interest what is the idea behind the ltd company fronting the rental business please? Sorry if I am prying but I am intrigued to know more! Many thanks

Mark Alexander

21:35 PM, 6th August 2014
About 4 years ago

Reply to the comment left by "Yvette Newbury " at "06/08/2014 - 21:23":

My guess is that it's for tax planning purposes, especially if Ivan and his wife are paying the higher rate.
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Yvette Newbury

21:57 PM, 6th August 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "06/08/2014 - 21:35":

That's why I was interested to know more - how this would work as opposed to placing the rental houses in the company name and what the implications would be.

Mark Alexander

22:07 PM, 6th August 2014
About 4 years ago

Reply to the comment left by "Yvette Newbury " at "06/08/2014 - 21:57":

Hi Yvette

It is generally a false economy and only really works where there are significant economies of scale at play. This is because accountancy fees generally extinguish any advantage, not for the accounts who recommend this strategy though of course!

The principle is relatively simple. If athe landlord(s) are higher rate tax payers then the cretion of a management company can be used to strip out some rental profit. The rate of tax the company pays may be lower than the rate of tax paid by the landlord hence a saving, notionally of course. Factor in the accountants fees, audit costs, cost of creating the company etc. and this may not be the case.

The problem is getting the money back out of the company. It's fine if the profits are left to build up and are only paid as dividends when the landlord is no longer paying the higher rate of tax. The other benefit is that the company may invest the money into a pension fund (e.g. a SSAS or SIPP) on behalf of the directors. Thisd can also have tax advantages buit costs of these schemes always need to be considered very carefully as they are not cheap to run.

I hope that helps 🙂
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