Landlord insurance can be considered as a nicety or mandatory depending on the risk level you’re comfortable taking. It is a specialist type of cover designed for property owners leasing properties to tenants and can cover everything from tenant safety to landlord belongings, the cost of a complete rebuild and even pay for financial compensation when a landlord is sued.
Our guide to landlord insurance is a reference for all UK landlords to learn about what’s available, what’s covered (and not), the average cost of landlord insurance and variables that affect policies and quotations.
Types of landlord insurance
Buildings insurance
Landlords are legally responsible for ensuring the buildings they rent to tenants are of habitable standards and safe for tenants. Any building defects need rectified at the property owner’s expense. Not the tenants. Landlord building insurance is not a legal requirement, however, paying for building repairs is.
Whether or not you need to arrange for this type of cover often depends on who owns the property. Not all landlords are property owners. Some are property investors using buy-to-let mortgages for financing. Should you have a buy-to-let mortgage, it is often a conditional requirement that specialist buildings cover is arranged to protect the mortgage providers financial interest.
Contents insurance
Landlord contents insurance can be beneficial in furnished and part-furnished leases. Buildings insurance cover will usually include the cost of repair or replacement to any building fixtures, such as a fitted bathroom or fitted kitchen.
They won’t usually include white goods coverage, or floor coverings. Anything that isn’t fixed to the property can be covered by contents insurance. The policy will only apply to landlord contents and not the contents belonging to tenants.
Tenants will require their own contents insurance if they want it. When considering whether you need this level of cover, consider the cost of replacing items if they’re damaged or stolen either through a burglary or your tenant selling your furniture to pay their rent.
Accidental damage insurance
Accidental damage cover is an optional extra that landlords can add to both buildings and/or content insurance policies. Standard policies can cover damage caused by fire, floods and environmental factors resulting in damage to property and/or your belongings, but it won’t cover accidental damage.
The type of protection offered depends on the cause of the damage. Flooring ruined by flooding would be covered with contents insurance, whereas the cost of specialist carpet cleaning to remove a red wine stain would be covered by contents insurance ‘with’ accidental damage cover added to the policy.
Landlord liability insurance (property owners’ liability insurance)
Landlords are responsible for their tenant safety and the safety of anyone within the property boundaries, including visitors and contractors carrying out repair and maintenance work on the property.
Within most landlord buildings insurance policies is some level of liability insurance. Not all policies include these so it’s important to find out if you have this cover or not. If not, it is beneficial to have as it protects landlords against potentially high expenses resulting from tenants claiming against an injury or damage to belongings when the landlord is at fault.
A loose carpet could lead to a trip, leading to a tenant making a personal injury claim and a loss of earnings if they’re unable to work. An inability to work could force tenants to raise a claim if they’re unable to pay their rent and they feel it’s the landlords fault the accident happened.
When comparing landlord liability insurance policies, the amounts you can claim is often from £500,000 up to £5 million liability cover. Some insurers will include free legal advice as standard with their liability insurance with others requiring a claim made for landlords to arrange their own legal advice. As with all other insurance policies, there will be an excess to pay before a claim is processed.
Legal expenses insurance
Legal expense insurance can provide financial assistance to cover the cost of an eviction process, legal costs arising from property disputes and cover legal advice and costs resulting from an HMRC tax enquiry.
Tenant default cover
Tenant default cover is an insurance policy protecting landlords financially when tenants fail to pay. The majority of these policies will pay the landlord their monthly rental income after a tenant fails to pay (usually) two months concurrently. There are also maximum terms attached to tenant default cover policies which can be either a maximum number of months a tenant fails to pay or be capped at a maximum value.
Landlord insurance legal requirements
No type of landlord insurance is a legal requirement. Only the financial obligations are such as legal expenses. The vast majority of buy-to-let mortgage providers do insist on at least buildings insurance to cover the cost of rebuilding a property. A surveyor may be required to determine the rebuild cost as it is different from a property’s market value.
Landlord insurance quotes vary by the type and level of cover. Generally, buildings insurance for landlords can cost around £150 per year. Those with multiple properties can get cheaper landlord insurance through a multi-property discount.
The more you choose to insure, the more the insurance will cost. Generally, the bare minimum is buildings insurance as that’s a requirement by BTL mortgage lenders. All other types of cover are optional with landlords free to mix and match the various options to cover as little or as many ‘what if’ scenarios that could jeopordise your investment and business.
Landlord insurance quotes are based on the type of property you have, the location, value, and the type of tenant you rent to. As an example, renting an HMO to students will have a higher risk of claiming than renting a three-bed semi in a quiet cul-de-sac to a working middle-aged family.
For tailored advice to minimise financial risk on your rental property, contact us today by calling 01925 499599 or stop by our office for an informative chat.
