HMO Insurance
A house in multiple occupation is rated as a different risk from the same building let to one family. More people, more cooking, more electrical load and more doors mean a higher frequency of small claims, and a fire risk that insurers treat seriously enough that some may decline to quote, particularly where the risk does not meet their underwriting criteria.
Licensing sits underneath the insurance. Mandatory licensing applies to properties let to five or more people forming more than one household, and many councils operate additional or selective licensing well below that threshold. The licence conditions cover fire doors, alarms, means of escape and room sizes, and an insurer will generally expect them to be met as a condition of cover.
Fire safety is a key underwriting consideration. Interlinked alarms to the right grade, fire doors with intact self closers, protected escape routes and compartmentation between lettings are what an insurer is buying when it agrees terms, and failures in these areas can materially affect the availability or validity of cover, depending on the policy wording.
We can advise landlords and agents on insuring HMOs, including how licensing conditions interact with policy conditions, and what changes when a property moves from a single family let to room by room letting.
Common claims and risk exposures
The exposures that produce claims in this trade, rather than a generic list.
Fire, and the spread of it
Multiple cooking points, more appliances and bedroom doors that get wedged open make both ignition and spread more likely than in a family home. The severity is higher too, because an escape route shared by several unrelated occupants is what turns a contained kitchen fire into a fatality.
Failed fire precautions
Self closers removed because a door bangs, an alarm isolated after burnt toast, a fire door replaced with a standard one during a refurbishment. Each is a small act by a tenant or a contractor, and each can breach a policy condition on a property where the fire precautions are the whole basis of the terms.
Higher frequency of small damage
Shared kitchens and bathrooms in constant use produce a steady run of escape of water, blocked wastes and damage to communal areas. Individually minor, collectively they make an HMO claims record look worse than a single let in the same street.
Theft and malicious damage between occupants
Occupants are strangers sharing a front door. Theft by a person lawfully on the premises is excluded or restricted under most policies unless there is forcible entry, which is exactly the circumstance an HMO produces.
Rooms standing empty
A student HMO empties over the summer and a professional house has rooms void between tenancies. Partial occupancy sits awkwardly with unoccupancy conditions written for whole properties, and it needs to be discussed rather than assumed.
The cover we arrange
We arrange insurance around the property, its use, construction, occupancy and ownership structure. The cover available will depend on the individual risk and the terms offered by insurers.
Buildings
The structure on a reinstatement basis, rated on the knowledge that it is let room by room. The sum insured should reflect any works done to meet licensing, such as fire doors, protected routes and additional bathrooms, which add to the cost of reinstating it.
- Rebuild cost including licensing works
- Fire, flood and escape of water
- Loss of rent following an insured loss
- Alternative accommodation where required
Property owners liability
Injury to occupants, visitors and contractors arising from the building. In an HMO the exposure is concentrated in shared areas: stairs, kitchens, hallways and the means of escape.
- Injury in shared kitchens and stairwells
- Claims from occupants and their visitors
- Limits typically £2m or £5m
- Defence costs included
Landlord's contents in shared areas
Cooker, fridge, freezer, washing machine, furniture in the lounge and the flooring throughout. An HMO usually carries far more landlord owned contents than a single let, because the shared rooms are furnished by the owner.
- Shared kitchen appliances
- Furniture in communal rooms
- Carpets and flooring throughout
- Replacement on a new for old basis
Loss of rent, room by room
Where a fire or flood closes the house, the loss is several rents rather than one. The indemnity period needs to allow for reinstatement plus the time to re-let each room, which in a student property may mean waiting for the next academic year.
- Rent from every letting, not one tenancy
- Indemnity period long enough to re-let
- Seasonal re-letting for student houses
- Usually a percentage of buildings sum insured
Malicious damage by tenants
Worth adding where turnover is high. Expect a larger excess and a condition that references are taken and deposits held, and expect theft by an occupant to remain restricted where there is no forcible entry.
- Deliberate damage by an occupant
- Higher excess than standard perils
- Referencing and deposit conditions
- Theft without force usually excluded
What an underwriter will ask
Having these to hand shortens the process considerably, and usually improves the terms.
- Number of lettings, number of occupants and how many households
- Whether the property is licensed, under which scheme, and the licence conditions
- Fire alarm grade and category, and when it was last certified
- Fire doors, self closers, emergency lighting and protected escape routes
- Occupant type: students, working professionals, housing benefit or local authority placements
- Whether any rooms are currently empty, and the usual pattern of voids
- Electrical installation condition report and gas safety certificate dates
- Any previous fire, escape of water or malicious damage claims
What affects the cost of your insurance?
The main factors insurers consider when assessing the premium.
Occupancy and household count
Premium rises with the number of lettings, and steps up again at the points where licensing bites. A five person licensable HMO is a different rating to a three person share in the same building.
Fire protection actually in place
A certified interlinked alarm system, compliant fire doors and a protected escape route are the strongest lever available. They widen the pool of insurers willing to quote, which matters more on this class than the rate itself.
Occupant type
Working professionals are rated most keenly. Student houses carry seasonal voids and higher malicious damage, and housing benefit or placement tenancies are rated higher again on claims frequency rather than on any single large loss.
Claims history
Frequency matters more than size here. A run of modest escape of water and damage claims will affect terms more than one larger loss, because it suggests how the house is being used rather than bad luck.
Conditions and exclusions to consider
Terms vary between insurers, so treat these as the questions to ask rather than a description of any one policy.
Breach of a fire precaution condition
Where the policy is written on the basis of a stated alarm grade, fire doors and protected routes, failing to maintain them is a breach of condition rather than a technicality. It is the most likely reason for an HMO fire claim to be reduced or declined.
Theft without forcible entry
Standard wording generally requires violent and forcible entry for a theft claim. In a shared house where occupants have keys, a theft by one of them will usually fall outside cover unless a specific extension has been bought.
Letting outside the declared basis
Adding a letting, converting a lounge into a further bedroom, or moving from professionals to students changes the risk the insurer agreed to. Each usually requires notification, and licensing may require it as well.
Unlicensed operation
Where a licence is required and has not been obtained, insurers may treat the property as not meeting the basis of the contract. It is also an offence in its own right with penalties and the prospect of a rent repayment order.
Common questions
What counts as an HMO?
Broadly, a property occupied by three or more people forming more than one household who share a kitchen, bathroom or toilet. Mandatory licensing applies at five or more occupants in more than one household, and many councils run additional or selective schemes that catch smaller properties, so the local authority is the place to check.
Can I use a standard landlord policy for an HMO?
Often not. Most landlord policies are written for a single household let, and letting room by room without telling the insurer risks the policy not responding. HMOs are normally placed with insurers who write that class specifically.
Does insurance require the property to be licensed?
Insurers will generally expect any required licence to be in place and its conditions met. Cover is not usually conditional on the licence itself in so many words, but the fire safety conditions in the policy tend to mirror what the licence demands anyway.
What happens over the summer when the students leave?
Tell the insurer. Some treat a property with tenancies running through the summer as occupied even when nobody is there, and others apply unoccupancy conditions once it is empty beyond the stated period. It is worth agreeing in advance rather than discovering the position after a burst pipe in August.
How do I get a quote from True Risk Solutions?
Call 01304 262880 and speak to a broker, or email info@truerisksolutions.co.uk with what you do, what you need cover for and a phone number with the best time to call, and a broker will call you back. We need a phone number to quote, because the cover and the price depend on questions that are quicker to answer on a call than by email.
Speak to a specialist who understands your industry
Tell us about your business and the work you undertake, and we will come back to you with cover options built around it. Call 01304 262880, or email us with a phone number and the best time to call and a broker will ring you back.