For the estimated 2.7 million landlords in the UK, buy-to-let properties are a popular way to create a financial investment for the future, and to generate extra income. But being a landlord brings a number of responsibilities, one of which is making sure you, your property, and your tenants are protected with the appropriate insurance. This is where landlord insurance comes in.
What is landlord insurance?
Landlord insurance – sometimes known as buy to let insurance - is a type of specialist cover that protects those who rent out their property from a range of potential financial losses.
Landlord insurance usually can be made up of a variety of policies, including buildings insurance, contents insurance, property owner’s liability, loss of rent, accidental damage, home emergency cover, and rent guarantee.
Is landlord insurance mandatory?
It's not a legal requirement to have landlord insurance. However, if you have tenants, you won't be covered with a regular home insurance policy if anything happened to your property or belongings.
What does landlord insurance cover?
While renting out a property can be a good way to generate extra income, it comes with certain risks that may be out of your control. Landlord insurance can help protect both yourself and your property from these risks.
Although a basic landlord insurance policy can provide protection from a range of issues you may face as a landlord, more comprehensive cover, as well as certain add-ons, can be taken out to ensure your property is as protected as possible.
Depending on the level of cover you choose, landlord insurance can provide cover for the following: -
Protects you from potential claims made against you if someone injures themselves or other property is damaged as a result of your property. It is a type of public liability insurance that will pay compensation, expenses and any resulting legal fees up to the limit of your policy to a third party such as a tenant, visitor, or tradesperson.
For example, if your tenant hurt themselves tripping on a damaged floorboard, or a loose tile fell off the roof and hit a passing pedestrian.
Loss of rent and alternative accommodation
If you are renting out your property with a mortgage in place or rely on your property as a source of income, loss of rent cover allows you to continue to meet your monthly mortgage payments or revenue requirements if your property becomes uninhabitable for your tenants following a valid insurance claim.
The alternative accommodation portion of this cover will pay out the cost for your tenants to live elsewhere if the property is damaged to the extent it is deemed temporarily unsuitable to live in, and while repairs are being carried out.
Provides cover for damage caused to the items you have provided for your tenants. This includes furnishings such as sofas, white goods, and wardrobes.
Will usually provide cover against damage done to your property from events such as fires, storms, subsidence, or floods, as well as malicious damage such as vandalism or theft.
Can provide protection against damage one to your property and contents by accident. This includes damage to the building, as well as its fixtures and fittings. For example, if you or your tenant smashes a window on the property by mistake. As a requirement for this cover, some insurance providers will ask for a background check to be conducted on potential tenants.
How much does landlord insurance cost?
How much you will pay for landlord insurance will depend on a number of factors including the type of property you are renting out, the age of the property, how much you charge in rent, details about your tenants, the type of cover you need, and whether you have made any claims in the past.
What can I do to ensure I'm getting the best deal?
Here are some things you can do to help ensure you’re getting a landlord insurance deal that suits your needs:
Combine landlord policies
As a landlord, the cover you require will usually be more than that of standard home insurance. These needs include, but are not limited to, building cover, contents cover, liability insurance, and accidental damage cover. Some insurance providers may offer all these together in one package, or have specific clauses built in that negate the need to take out additional cover elsewhere.
Consider a specialist insurer
An insurance provider that specialises specifically in landlord insurance may be best placed to assess your situation and provide you with only the cover you need and cut out anything you don’t.
Make sure the rebuild value of your property is correct
Whether it’s for a residential or rental property, it’s important to make sure your property is valued correctly. Doing so will help you avoid either underpaying or overpaying on your premiums.
Consider whether you need contents insurance
If you're renting out an unfurnished property, or have only furnished the property with items that would not benefit from making a claim on (e.g., old carpets, cheap appliances etc.), you might consider bypassing contents insurance altogether.
Say 'no' to pets
Insurers consider animals of higher risk to a property. So, if you have tenants with pets, your insurance premiums may go up.
Vet your tenants carefully
Certain tenants (e.g., students or someone receiving DSS) will be seen by insurers as bringing more risk to the property. These ‘higher-risk’ demographics could make your insurance premiums more expensive.
Minimise how long you leave your property empty
Generally speaking, insurers consider empty properties to be vulnerable to burglars or vandalism. For this reason, they will have a set period of time where your property can be left empty. This period is usually up to 30 consecutive days, but it could be more or less depending on your provider.
Do I need to carry out a background check on tenants to make a claim on my landlord insurance?
You are not legally obligated to run a background check on prospective tenants.
However, some insurance providers will request a background check on tenants or ask if anyone living at the property has an unspent criminal conviction. Failure to disclose this information could invalidate your insurance.
Frequently Asked Questions
I am a leasehold flat owner. Do I still need buildings insurance as part of my landlord insurance?
If you’re a leasehold flat owner, you usually won’t be responsible for taking out buildings insurance. In most cases, you freeholder will take care of buildings insurance for the entire block of flats, and you will likely pay a share of the buildings insurance cost as part of your service charge.
However, you may still want to consider landlord contents insurance for your leasehold flat. Contents insurance will cover any possessions that belong to you in that flat that become damaged or destroyed following an insured event. It does not cover contents that are accidentally damaged.
If you rent out a furnished property, your contents limit will be higher than an unfurnished property.
What about my tenant's possessions?
Your tenant is responsible for the cover of their own possessions. It’s always a good idea to clarify this with your tenants before they move in.
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