It is all too easy for the landlord to make the assumption that in the event of his death the family could sell any of the properties to pay off the outstanding mortgage debt, and therefore they would be covered. This is of course a potential outcome but it may not in practice be the most desired outcome at the time. What if property values have dropped, or the rental income is now more valuable to support the family household?
For most, traditional term assurance and family income benefit could replace loss of income brought into the family monthly budget, but another consideration could be key person cover. For a sole-trader landlord, this would be taken on an ‘own-life’ basis. The cover would then be written in trust with a family member or next of kin as beneficiaries. If the landlord were to die, this provides proceeds to use towards clearing outstanding mortgage debt or covering business costs until the properties can be sold.
Business protection offers solutions for landlords considering not purchasing properties via a limited company. Both relevant life and key person cover could be considered with proceeds from the key person being used to either protect profits or clear debt. Key person cover can include life insurance or life insurance with critical illness, some providers also provide children’s cover as part of their product offering.
As providers look at new ways of making their business protection products more relevant in today’s world, adding more of a support service is quite valuable. A good example of this is LV’s Business Care which provides small business owners access to advice on two key areas – legal and tax, providing guidance on current and upcoming tax rules alongside free legal advice.
With the challenge of tax relief changes affecting buy-to-let landlords my view is that this additional information would be beneficial alongside seeking their own tax advice.