While investing in property to let can be a fantastic long-term investment, many forget the expenses and problems you can encounter along the way. Hundreds of things can go wrong with a property, whether you live there or not – from theft and vandalism to burst pipes and flood damage, the cost of repair for minor and major incidents can quickly stack up.
Fortunately, you don’t have to let these issues eat into your profits. Specialist landlord insurance can protect property-owners against all these risks at their rental properties. Not only will your cover help you get the problems fixed right away, but they’ll cover you financially against repair costs, legal costs and more. This guide will take you through:
- What is landlord insurance?
- What is covered by landlord insurance?
- Do I need landlord insurance?
- How much cover do I need?
- How much does landlord insurance cost?
- How to find a insurance provider & choose a policy
- Final thoughts & FAQ’s
What is landlord insurance?
Most homeowners choose to take out home insurance, to cover damage to the property they live in as well as their belongings. Landlord insurance works in much the same way but covers the landlord for the property they are renting out to tenants. It’s suitable for both experienced landlords with multiple properties, as well as buy-to-let owners who invest in a single property to rent out, meaning its sometimes known as buy-to-let insurance.
Landlord insurance differs to home insurance in that it also typically covers the risks associated with a rental business. This can include such instances as your tenants not paying you, or the cost of rehousing your tenants if they have to move out following property damage for which you’re found liable. On some policies, you can even claim the rent you’ve lost in that period.
How does it work in practice?
Landlord insurance works much the same as other insurance policies. If you need to report a claim, contact your insurer as soon as possible. To do this:
- Call the claims number. Your insurer should provide this in your policy documentation.
- Explain why you need to make a claim, and provide your insurance policy number, which you can find in your policy documents
- Make sure you follow all the advice that the insurer provides over the phone on how to mitigate the damage and pay your excess
- Send in any paperwork they require, including supporting documents such as photographs or estimated repair costs
- You may need to meet with an assessor, who may want to visit the property to check the damage and collect further details.
What is covered by landlord insurance?
Broadly, there are three main types of insurance which come under a landlord insurance policy: buildings insurance, contents insurance and liability insurance. Beyond the main types included on most landlord insurance policies, you can choose to add optional extra cover if your rental property has some peculiar features.
As the name suggests, this strand of landlord insurance covers the owner against damage to the physical building. It includes damage to the structure of the property and can even cover the entire rebuilding of the home if it is irreparably damaged. Many policies will also include outbuildings under buildings insurance, provided they’re within 100m of the main house.
Specifically, buildings insurance tends to cover the following types of damage:
- Theft or attempted theft
- Vandalism or malicious damage
- Lightning, storm or earthquake damage
- Burst pipes
- Fire damage
- Flood damage
- Escape of water or oil
- Accidental damage.
A landlord buildings policy usually insures built-in aspects to the property as well, such as damage to kitchens and bathrooms in the above instances. Boilers, too, are generally included under a landlord buildings policy.
If your rental property is a flat within a block, you will usually have buildings insurance under a shared block policy, which you’ll have to pay your share of as part of your service charge. Make sure you check exactly what’s covered under the shared block policy, as it may be worth taking out additional cover for anything not included.
Some landlords take out contents insurance as an add-on to buildings insurance, though it is possible to take out contents insurance only, as a standalone policy. It covers the cost of repairing or replacing any fixtures and fittings in the property, such as furniture, carpets, free-standing white goods and other electrical items in the event of a flood, fire or other damage.
Whether you choose to take out contents insurance will largely depend on whether you rent out a property furnished or unfurnished. Many residential landlords let out properties wholly kitted out, in which case contents insurance could save you huge amounts of money on damage to any of these items. Even landlords who rent out almost empty properties may want to take out contents insurance if they have provided fridges and washing machines as part of the tenancy agreement, as these can be costly to replace in one go following a fire or flood.
Note that as a landlord, your contents insurance only covers the items you provided in the property. The policy won’t pay for the belongings of tenants – they’ll have to take out their own contents insurance policy for those items.
If your tenant or a visitor sustains an injury at your property, as a landlord, you may be found liable. Liability means you’d have to pay compensation if they made a claim, as well as fork out the claimant’s legal fees on top of your own. These fees can wrack up to enormous sums if you don’t have the right cover in place.
Liability insurance is designed to cover you against claims made by tenants or visitors to your property, if they sustain an injury or fall ill at your property, owing to your negligence. Say a visitor to the property trips over a loose floor tile and injures themselves. You would have to pay the visitor compensation, cover their legal fees and cover other costs, such as any earnings the visitor may lose if they’re unable to work. Liability insurance covers illness, too. If a tenant is suffering from respiratory issues due to damp in the property you are renting, you would also be found liable.
Most landlord insurance policies offer liability cover up to £2 million. This may seem excessive, but fees can quickly reach this figure after compensation and legal fees are taken into account. Remember that while liability insurance will cover you against accidents at your property, it is still your duty as a landlord to ensure that your rental properties are as safe as possible. Make sure you aware of your responsibilities as a landlord to guarantee the safety of your tenants.
Buildings, contents and liability insurance are the main features that any landlord insurance policy should include. You can also get standalone policies if you don’t wish to take out full landlord insurance cover. Many insurers also include additional protection, or you can pay extra to add these on. You might want to consider adding some of the following to your policy.
Some landlord insurance policies do come with rent protection, or you can add this onto your policy for a fee. A rent guarantee, sometimes referred to as tenant default insurance, will help you cover rent, in the event that a tenant can’t, or won’t, pay up. This one is particularly important if you have a mortgage on the rental property, as it will make sure you don’t default on your mortgage payments and risk incurring bad credit.
Loss of rent cover can also insure you against any loss of income incurred if your tenants cannot live at your property for any reason. Say, if there’s a fire or flood, and they need to move out while you repair the damage.
Legal expenses insurance
Should you become involved in a dispute with one of your tenants, this cover will pay for your legal costs. Not many landlords choose to take this out, but it can help if you end up in court over a dispute with your tenant.
Key care insurance
A common problem for landlords is tenants losing their keys. Key care insurance can cover any costs you have to pay a locksmith for replacing the locks or cutting new keys. You’ll also be covered if tenants break their keys, or if the keys are stolen.
Home emergency cover
If there’s a sudden emergency at your property, home emergency cover will provide immediate help. This could include a water leak, or the boiler breaking down. There isn’t usually an excess to pay if you make a claim, but the maximum limit is often around £500 per claim which only applies to the immediate cause of damage.
Boiler breakdown cover for landlords
Boilers are notoriously fickle, and costly to fix. Not all home landlord insurance covers boilers as standard, so be sure to check your policy. It may appear under home emergency cover, too, but not always.
Boiler breakdown cover helps you get the boiler back up and running as quickly as possible, making sure your tenants aren’t without hot water and heating for long. Boiler cover provides a number to call for any boiler-related problems, and you can get an approved engineer out to help as soon as anything happens. It’ll cover the cost of repairing the boiler up to the limit of your policy, minus any excess.
Do I need landlord insurance?
Legally, you’re under no obligation to take out a landlord insurance policy in the UK. However, if you let out a property without insurance, you’re leaving yourself open to a lot of risks. From accidental damage and defaulting tenants to fire or flooding damage, a lot can go wrong. At best, you could incur significant repair damage, and at worst, you could face a hefty lawsuit.
It’s important to note that your home insurance policy won’t cover you if you are renting out to tenants. Even if you insure the rental property in your own name, the provider can refuse to pay if the property is being lived in by tenants.
While not a legal requirement, you should also bear in mind that many lenders won’t let you take out a buy-to-let mortgage if you don’t have landlord insurance.
What is a buy-to-let mortgage and insurance?
A buy-to-let mortgage is a particular type of mortgage, suitable when you purchase a property as an investment. If you’re buying a property to live in yourself, you can get a standard residential mortgage. Landlord insurance is sometimes known as buy-to-let insurance, specifically if it targets individuals who have invested their money in one property.
How much cover do I need?
Most policies allow you to mix and match from the above types of cover. The standard cover varies from provider to provider, in terms of what events they insure as well as their maximum cover limit. Typically, limits to look for are £2 million of public liability cover, minimum £50,000 for legal expenses and £10,000 of contents insurance at a minimum. Many insurers allow you to extend upwards of this.
When looking at buildings insurance, you must provide an accurate estimate of the rebuild value of your property. This value refers to how much it would cost right now to rebuild your property from scratch if it was irreparably damaged, not the price you paid for it or the market value. You must also take into account the cost of site clearance and all professional fees. If your insured sum is less than the actual cost of the building, you will be liable to pay the difference, so it’s crucial to get right. The Association of British Insurers (ABI) offers guidance on how to work out your rebuilding cost.
How much does landlord insurance cost?
The amount you pay will depend on several factors, the main one being how much cover you’re after. The three main strands of landlord insurance listed above can be bought as standalone cover, which will bring the cost down.
The main factors affecting cost will be:
- The location of the property
- What type of property it is
- How many tenants are in the property
- The rebuild cost of the property
- The level of contents you’re insuring
- The level of excess you choose.
How to find a insurance provider & choose a policy
When you’re shopping around for an insurance policy, be sure to check the extent of cover they offer, and the maximum sums they’ll pay out. A primary consideration is how much you have to pay. There’s rarely a one-size-fits-all pricing plan, so you will need to request a quote. Most insurers will provide one online if you provide sufficient information. When you begin your search, make sure you have the following details to hand to generate an accurate quote:
- Your property’s build date and the rebuild cost
- Types of locks and alarms fitted at the property (such as smoke alarms, burglar alarms)
- The total value of your personal belongings in the property
- Types of tenants living in the property and the length of the contract agreement
- Details of any claims you’ve made in the last five years, including cost.
Going through a broker
Some insurance providers only offer their landlord insurance packages when going through a broker, as is the case for Zurich and RSA. Brokers can help you secure better cover than if you went directly to a provider, having the know-how to compare multiple products and insurance providers with your needs in mind.
They’ll also help you find the most competitive price on the market: insurers often offer reduced rates to brokers, as there’s a lower risk for the insurer. While brokers do take a cut of commission, going through a broker can still work out cheaper for you and your policy may well come with a lower premium, too.
Going through a broker is a good idea if you want specialist cover or have an unusual property. They will help you compare quotes and features of multiple policies from a range of providers, whether that’s landlord building insurance or multi-property cover. Another significant benefit of going through a broker is the additional support you will receive if anybody makes a claim against you. It’s the broker’s job to represent you, and it can be helpful having experts negotiate with your insurer, particularly in the case of a disputed claim.
To find a reputable broker, you can use the Find a Broker tool offered by BIBA, the British Insurance Brokers’ Association, which ensures all of its members adhere to rigorous industry standards.
Key insurance policy terms
Insurance policies are known for being dense with jargon. Before you choose any policy, you must understand exactly what is and isn’t covered under the policy. To help, here are several terms which are especially important to be familiar with:
- Perils: these are the things that the policy covers. The list of perils should be one of the first things you look at when choosing an insurer, as different providers will insure a different amount or list of perils.
- Sum insured: this refers to the maximum amount an insurer will pay out for a single claim. As we have seen previously, the sum insured should be equal to the cost of totally rebuilding your property, as per today’s prices. You will usually have an ‘automatic reimbursement’ process in your policy, which means the maximum sum insured will stay the same after you’ve made a claim. However, your policy will usually increase if you renew your policy.
- Excess: this is the amount of money you would need to contribute yourself, before the insurer pays the rest, in the event of a claim. Cheaper policies usually have higher excess fees, so you’ll have to do a quick cost-benefit analysis to determine which is likely to save you more money in the long run. A rent guarantee tends to come with an excess equal to one month’s rent.
- Exclusions: these are anything the policy won’t cover. Make sure you check out the exclusions list before you purchase a policy.
Final thoughts & FAQ’s
Buying insurance of any kind can feel like wasted money. It’s hard to see where your money is going – until you really need it. It’s not until you face a significant issue that has you forking out thousands that you wish you’d paid a small amount to an insurer every month. Beyond the expenses of repairing damage, if you’re found liable for something which results in illness or injury to your tenants, you could be facing a lawsuit – that could mean crippling legal fees and potentially staggering settlements.
As insurance goes, landlord insurance is relatively cheap. It’s also there to help you – consider getting landlord insurance to get your rental problems sorted faster, and take the stress out of your investment. Still have questions? Find answers to common queries about landlord insurance, below.
Should you get cheap landlord insurance?
As landlord insurance isn’t mandatory by law, some people tend to opt for the cheapest cover they can find. However, the risks associated with owning properties is high. A lot can go wrong with a house, and if you’re not the one living in it, you can’t keep a close eye on all its fittings. What’s more, what can go wrong with a property is typically expensive whether it’s something relatively minor, like a broken washing machine, or something major, like subsidence or flood damage.
While there is cheap landlord insurance available which will still cover you in these instances, it’s worth looking into how much excess you have to pay with cheaper cover. More often than not, the cheaper the cover, the higher the excess and the more restrictions there will be. You might end up losing more long-term by purchasing a cheaper policy if you find yourself shelling lots out in excess, or facing significant jumps in your premium every time you make a claim.
One final thing to note is the response time you can expect. While a cheaper option may seem attractive, you are likely to get a better response time from the more costly providers, such as Simple Landlord insurance or Direct Line. A faster response time allows you to resolve issues more quickly and maintain good relations with your tenants. Finally, landlord insurance tends to be one of the cheaper insurance products anyway, so it can be well worth investing a little bit more for lower excess, unlimited claims and higher-quality customer service.
What about unoccupied property landlord insurance?
Properties run a high risk of damage and disrepair, whether they’re lived in or not. Some of the most costly damage comes from flooding and storms, which can happen at any time. If you’ve got rental properties without any current tenants, it’s still important to get cover.
Vacant properties are a common issue for landlords. You might have an empty buy-to-let property for several reasons, including:
- You’ve only just purchased the property and don’t yet have any tenants
- Being in between tenant contracts
- You’re refurbishing, redecorating or doing work on the property
- You let to students, and the property is empty over the holidays.
Insurers generally see unoccupied properties as having a higher risk of theft and damage than those being lived in. As such, many providers oblige you to take out additional, separate insurance for empty properties. Most unoccupied cover applies to properties empty for 30 days to a few months, although some longer-term vacant property insurance can cover you for up to a year.
Sometimes, standard insurance policies will cover you for an unoccupied property, but not always. If they do insure unoccupied property as standard, it usually comes with certain conditions which must be met:
- You may have to turn off services such as electricity or gas
- You may have to keep the property at a specific temperature during the colder months to prevent pipes from freezing and bursting
- They may make you regularly visit and inspect the property, usually every seven days
- You may have to secure the property against theft by using approved locks on doors and windows and installing a burglar alarm. If you use certain locks, such as five lever mortice locks, you could knock even more money off your premium.
Not all standard landlord policies cover you while you don’t have tenants living there, particularly if the property has been left empty for an extended period of time. Even if it’s not included as standard, most providers do offer vacant property landlord insurance, but you may have to ask for it and pay more to add it on. Be sure to check your policy, so you know exactly what’s covered.
What is HMO landlord insurance?
HMO stands for house in multiple occupancies. The definition of an HMO varies, but the government website states that HMO refers to a property that is rented to three or more people who are part of more than one household, where the tenants share essential facilities such as a kitchen or bathroom of both. A home becomes a large HMO if at least five tenants live in the property forming more than one household and use shared essential facilities.
A household refers to either a single person or members of the same family who live together. Families also refer to couples living together, even if they are not married. A property is often an HMO in the case of student housing where students have their own bedrooms but share bathrooms and kitchens, or in blocks of flats where tenants share a toilet or bathroom.
Landlords must have a license for large HMOs. Landlords insurance won’t cover you for HMO properties. The risk is a lot higher when it comes to renting out HMOs, and landlords must seek out expert advice to correctly insure their HMOs. Not all insurers offer HMO insurance. The best way to get cover for HMOs is to go through a broker, who can ensure you meet your legal obligations. Some providers offering specialist protection for HMOs include:
- Towergate Insurance HMO cover insures student accommodation buildings, bedsits and more
- The Alan Boswell Group provides comprehensive HMO insurance, as well as legal advice to help landlords understand their legal obligations for an HMO.
Landlord insurance case study
A local landlord has a buy-to-let property. Six months into their first rental contract, one of the pipes bursts in the kitchen. The water spreads through the cabinets, flooding the kitchen and hallway. All the kitchen units, flooring and part of the ceiling are damaged beyond repair and need replacing. The water runs out into the adjacent living room, destroying the living room carpet, which also needs replacing.
Refurbishing the kitchen would take six months to complete. Fortunately, the landlord has landlord insurance, complete with contents insurance and rehousing for tenants. The landlord is able to claim back repair costs of £2,200 and claim £6,300 to rehouse the tenant while the work takes place.
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Without landlord insurance, this affair could have cost the landlord almost £10,000 just six months into their investment. Such a blow could have landed the owner in significant debt and caused them to default on their mortgage payments. With their extensive landlord insurance policy, however, the landlord only paid the premium and one week’s rent, losing less than £1,000. Not only has insurance covered the landlord financially, but their cover meant they were able to deal with the issues quickly and effectively, protecting their relationship with their tenant.