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Do I Need Landlord Insurance?

Do I Need landlord insurance

If you’re a new or existing landlord and own one property or more, it is your responsibility to ensure that it is properly insured when renting out the property out to others. If you fall into this camp, you may be wondering what sort of landlord insurance you need.

Although there is no legal requirement to buy landlord insurance, most buy-to-let mortgages come with the condition that you have them. As a result, landlords are strongly advised to take out landlord insurance with adequate cover to protect them from the risks of renting to others, including the significant unexpected costs that would arise should the property suffer damage, if a tenant gets injured, or rental income is removed for some time.

When buying-to-let it’s important to understand the obligations and responsibilities that you as a landlord have when it comes to making sure that the property is properly insured. The right insurance will ensure that you’re protected from large unexpected bills for accidents and damage when things go wrong.

Read on for an overview of everything you need to know about landlord insurance including what it is, when you need it and why regular home insurance won’t work for landlords. 

What Is Landlord Insurance?

Handshake over model house

To decide if you need to purchase landlord insurance, you must first understand what it is and what it covers;

  • In a nutshell, Landlord insurance reflects your responsibilities and covers the risks associated with being a landlord.
  • Landlords’ insurance is a specialist type of homeowner insurance policy that is intended to protect the owner of a property from suffering the financial losses associated with the risks of renting out property.
  • The risks associated with a rental property include damage to the building itself but also additional cover to allow for the specific scenarios that affect landlords such as; loss of rental income, contents insurance for any fixtures and fittings that are included in the rental, personal injury to tenants as a result of poor maintenance and accidental damage cover.

It’s important to realise that standard home insurance policies aren’t designed to cover a landlord’s insurance needs for a rental property and if you have taken out a mortgage to fund the purchase of the property, the lender is also likely to include compulsory requirements around insuring the building, including taking out specialist landlords insurance. Failure to do this could invalidate your mortgage agreement and prevent a regular insurance policy from paying out should a claim ever be made.

What Is And Isn’t Covered?

Landlord insurance is a specialist type of homeowner policy that is designed to protect rental property owners from financial loss resulting from the specific risks of owning a rental property. It can be tailored to cover a wide range of things including, accidental damage, building’s cover, contents cover, liability cover, rental income cover, professional liability and legal protection.

Just like any other type of insurance policy, landlord insurance can provide different levels of protection for a whole range of scenarios that could cause you to pay out significant sums of money should things go wrong with the tenants or the building itself whilst you are acting as a landlord.

As a landlord, when you buy landlord insurance, you will be the policy owner and have full control over what is and isn’t covered but you may wish to consider including the following protection:

  • Accidental damage
  • Contents cover
  • Liability cover
  • Rental income cover
  • Professional liability
  • Legal protection
  • Rehousing tenants cost
  • Damage from fire, lightning, explosion or earthquake
  • Riots, civil disturbance or malicious acts
  • Storm or flood
  • Escape of water

Buildings Insurance

If you also own the freehold of the property, you will need to include landlord buildings insurance in the policy too. The building policy covers the structure of the building itself including any built-in items such as boilers, kitchens and bathrooms. Building insurance should cover the full cost of rebuilding the property from the ground up if needed, including any associated fees.

Contents Insurance 

If you’re renting a property on a furnished or part-furnished basis you should also consider making contents insurance part of your landlord’s insurance policy. Contents insurance would cover any furniture, fixtures or fittings such as white goods, sofas, carpets and lighting that you want to insure for the tenancy which could all be very costly to replace in the event of an accident or damage.

Do I Need Landlord Insurance?

Does every landlord need landlord insurance? Whilst it’s highly recommended that landlords do take out a specialist landlord insurance policy when renting out their property to tenants, it is ultimately the choice of each landlord. That is unless there is a mortgage on the property and the lender’s terms stipulate that landlord insurance is required.

If you are mortgage-free, or in the highly unlikely event that your mortgage provider doesn’t insist on landlord insurance being taken out, the decision on whether or not to take out insurance on a property that you rent out to tenants is up to you but you should consider;

  • Could you afford to be sued by a tenant for injury resulting from failure to maintain the property or employ a suitable tradesman to conduct repairs?
  • Could you afford to rehouse tenants in the event of a fire or flood?
  • Could you afford to lose rental income between lets or if tenants couldn’t live at the property due to damage?
  • Could you afford to repair the property in the event of severe damage?

When weighing up whether to take out an insurance policy it’s worth considering if you could afford to pay to repair the property, its fixtures or fittings in the event of an accident or damage from fire, theft, flood, or if could you afford to pay the legal bills associated with being sued if a tenant is injured at the property.

If the answer is no, then landlord insurance is the sensible approach to take. Having landlord insurance in place is also the sign of a landlord that takes their investment seriously and could be beneficial in securing reliable tenants that lookout for these kinds of assurances when choosing somewhere to live.

Isn’t Landlord Insurance The Same As Homeowners Insurance?

Whilst it may seem that on the face of it both policies do the same thing, landlords face a different set of risks compared to regular homeowners that intend to live in the property they have bought themselves.

Every Insurance policy is designed to protect policyholders from the risks associated with their activities and as the risks associated with rental properties are different to those faced by owner-occupiers, the requirements and cover offered for the insurance policies also differ and therefore landlord insurance is not the same as homeowners insurance.

Due to the specific risks associated with renting a property, landlord insurance is often stipulated as a mandatory requirement by mortgage lenders on buy to let homes and regular homeowner insurance wouldn’t be accepted or be valid for anyone that is renting out their property.

Do All Property Types Need Landlord Insurance?

Aerial view of a town

Regardless of building material, age, size or location, if you’re renting out a studio apartment to a seven-bedroom mansion with a swimming pool, if you own any kind of residential property that is rented out to tenants then you should consider taking out landlord insurance.

Commercial properties such as retail and industrial units and offices will need to be covered by a specialist commercial landlord policy as renting buildings for these activities pose a different set of risks to the landlord.

Consider landlord insurance for all types of residential property including:

  • Bungalows,
  • Maisonettes,
  • Semi-detached houses,
  • Detached houses,
  • Flats in dedicated flat blocks or converted houses or buildings
  • Terrace houses

What Should The Policy Cover?

As with any insurance policy, not all options for landlord insurance are equal. So rather than opting for the cheapest quote, you should carefully consider what you need the insurance to cover so that you can check if any proposed policy will include this. The policy can include as much or as little as you want it to but the level of cover that you ultimately decide to take out will depend on your attitude to risk and the budget you have available.

At the very least, landlord insurance policies should cover:

  • Buy-to-Let buildings cover
  • Property owners’ liability insurance
  • Tenant default/loss of rent
  • Landlords contents Insurance
  • Accidental damage insurance
  • Landlords legal protection

You should also remember that if you employ anyone to help you to manage the rental property, you are legally required to hold employers liability insurance too.

Related Questions

What Do Landlord Insurance Options Cover?

Whether your insurance provider offers lots of protection as standard, or you need to add on various elements to a basic cover plan, it’s worth keeping an eye out for the following types of landlord insurance cover that you may want to be included in your policy;

  • Property owners’ liability insurance: Protects landlords against compensation claims when the property causes injury or damage to tenants or visitors.
  • Tenant default/loss of rent: Provides cover if active tenants with a tenancy agreement in place default on their rental payments. This policy won’t cover you for lost income when the property is vacant.
  • Landlords contents insurance: Covers damage or theft of any fixtures, fittings or furnishings that you provide with the house. This could include carpets, white goods, curtains etc. and you should always check the wording of what is and isn’t covered as not all policies are the same.
  • Accidental damage insurance: Even the best tenants can cause accidental damage. Adding this to your policy provides peace of mind to the landlord and tenant that nobody will be out of pocket if accidents occur.
  • Buy-to-Let buildings cover: Or landlord building insurance covers you from damage to the property itself resulting from fire, lightning, water, explosion or malicious damage. Ensure you have sufficient cover to meet the cost of repairing or rebuilding the property after damage or destruction.
  • Employers liability: If you pay anybody to assist you in managing the property, you are legally required to have employers liability insurance to protect you from claims from accidents happening in the property.
  • Landlords’ Legal protection: if faced with legal action or claims of negligence or injury, legal bills can quickly add up. Landlords’ legal protection can cover some or all of your legal fees.

How Much Does Landlord Insurance Cost? 

There is no single answer to this question as every home and every insurance policy is unique and tailored to the needs of the landlord and the risks they may face in their specific circumstances.

The best way to get an idea of how much your landlord insurance premium could cost is to take a look at insurance policy comparison sites and select the level of cover that you need. This will ensure that you have a rough idea of the costs involved for you and your property but should also remember to factor in excess payments when considering your insurance budgets. Also, remember to check individual insurers directly as not all companies are listed on comparison websites.

For example, when calculating how excess affects the amount you will need to pay in the event of an insurance claim being made; if your rental property suffers fire damage to the value of £10,000 but your excess payment is £3,000, then the payout from the insurance provider would only be for up to £7,000 because you must cover the first £3,000 yourself.

Summary

If you own property that you let out to others then you may have wondered ‘do I need landlord insurance?’ The simple answer is whilst there is no legal requirement to have landlord insurance, most buy-to-let mortgages come with the condition that you have it and even when mortgage-free, it’s good practice for landlords to ensure they are protected from the specific risks they face when rending out their property.

Landlord insurance can provide you with peace of mind that you are covered for:

  • Accidental damage
  • Contents cover
  • Liability cover
  • Rental income cover
  • Professional liability
  • Legal protection
  • Rehousing tenants cost
  • Damage from fire, lightning, explosion or earthquake
  • Riots, civil disturbance or malicious acts
  • Storm or flood
  • Escape of water

 

Ultimately, the decision of whether to purchase landlord insurance is up to you as a landlord, but if opting out, you should consider if you could afford to meet the costs that an insurance policy would cover for you if the property becomes damaged, untenantable, or if your tenants are injured or unable to provide a rental income for the property that you own.

Before deciding whether to purchase landlord insurance, weigh up the risks and likely cost of putting right any damage that could occur, against the cost of an insurance premium that would cover you in the event it happens.

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