Reducing risk before even thinking about considering landlord’s insurance can lead to long term financial benefits. These long term benefits stretch not only to you but also to your tenants, the insurance company and even the economy.

So what exactly is risk management about? Risk management in its simplest form is about identifying risk, reducing it, deciding how much you can accept yourself and then transferring the balance via insurance.

This means thinking about your property and how it is used in order to consider ways of making it less likely to suffer a loss. For example, if you have a building that has a shop unit including a retail outlet on the ground floor, you might wish to avoid letting it to a fish and chip business, because this will attract a much higher fire insurance premium. After all, the likelihood of a loss is far greater than for a green grocer, for example. This much is obvious.

On the other hand, requiring tenants to keep common areas of the building clear of debris is something that can actively reduce the risk of any fire that might occur, becoming worse. By looking at and identifying a potential risk, and then taking steps to reduce it you minimise the chances of an insurance claim and this keeps your premiums down.

In fact, taking a few moments to look at who uses your property – and how they do so – can save you money in several ways, not least by keeping premiums down and reducing the time you have to spend putting things right later on. Nobody expects you to be an expert on fire risks; but you know your property better than anyone else. If you can see ways of reducing the risk of anything adverse occurring, everyone is better off.

This list is by no means exhaustive, but you might like to consider:

• Ensuring that everywhere is clean and well ventilated;
• Keep all common areas clear and require tenants to do the same for their areas;
• Vet all potential tenants to ensure that they are likely to respect your property;
• Avoid letting to tenants likely to use dangerous substances or flammable material;
• Do not allow sub-letting without your specific approval;
• Provide and maintain a suitable level of fire extinguishing appliances suitable for the use to which different parts of the building are put;
• Take references to ensure that you will continue to be paid rent and other costs you pass on.

It is important, however, to recognise that you are not alone. Specialist insurance brokers, operating in the landlord’s insurance and property-owners insurance markets will be able to help you plan to reduce your exposure to risk and thus save you insurance premiums.

You should always ask your financial advisers about how risk management can reduce the cost of landlord insurance and what experience they have of dealing in this sector.

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