Landlords have a whole host of practicalities to think about after they have invested in a property and rented out the house or flat.
There are an estimated 2.82 million private landlords in the UK who should consider protecting their valuable assets with insurance.
Standard home insurance you buy as a homeowner will not cover you against many of the risks associated with being a buy-to-let landlord. Landlord insurance is an important safety net to secure.
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What is landlord insurance?
Landlord insurance is a specialist type of cover for property owners who rent out their homes. It protects your property against damage and loss from theft, fire and bad weather.
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It also comes with landlord specific features such as cover for unpaid rent or damage caused by a tenant.
It can also cover contents and other extras if you opt for more comprehensive insurance and add-on features.
What does landlord insurance include?
Each policy is different but broadly your insurance will cover theft, fire, flooding, extreme weather events, burst and frozen pipes, storm damage, subsidence, loss or theft of keys, accidental or malicious damage by tenants and costs associated with eviction.
If cover includes contents, then furniture, freestanding appliances and any garden equipment will be protected too.
You can also add legal expenses insurance that can help to recover legal costs as a result of things like pursuing unpaid rent, tenant personal injury claims and eviction.
Public liability cover and loss of income might also be in some more comprehensive policies.
How much does landlord insurance cost?
The level of premium you will pay depends on all the usual factors used to calculate standard home insurance, with a few extras thrown in.
An insurer will weigh up the risks – and cost – judging by the location, type and size of property, the cost to rebuild it and security features such as a burglar alarm.
The cost will also factor in what type of tenants you plan to allow.
The average cost of landlord cover including contents and property owners’ liability insurance is £301.87 a year, according to comparison website GoCompare.
Is landlord insurance mandatory?
There’s no legal requirement to buy landlord insurance but getting cover might be a condition set by a lender if you have a buy-to-let mortgage.
Landlords who maintain their properties to a high standard can reduce the risk of some failures, say, by making sure the place is kept in a state of good repair. But it’s not possible to get rid of risks entirely, which is why this insurance is an important consideration.
Why might you need landlord insurance?
While being a property investor can be financially rewarding, just as with any investment, there are also plenty of risks involved.
Landlord insurance can help manage those risks by protecting against serious financial loss.
It can give you peace of mind that a valuable asset is protected, and that if the worst-case scenario comes to pass, you’re covered.
This is especially true of the legal cover that can help to recover costs if you need to pursue a tenant for unpaid rent or if a tenant makes a claim for personal injury caused in your property.
Do I need landlord insurance if I'm letting a room?
If you rent out a room in your own home you possibly don’t need separate cover but you would need to tell your existing home insurer.
It could potentially increase your premium because insurance providers consider lodgers – who might be complete strangers – to be an extra risk.
Failing to tell them so could invalidate your insurance which is a false economy should you need to make a claim. Your insurer might want you to pay for liability insurance to cover you if your lodger takes legal action after injuring themselves in your home, for example.
Some providers, however, might not cover you if you rent a room out to a lodger, so you may need to switch home insurers. Bear in mind that you may be charged a fee for cancelling your existing policy early.
Do I need landlord insurance for short-term rentals?
The rise of online platforms like Airbnb has made it easy for individuals to rent out their properties on a short-term basis rather than sign up tenants for longer periods. This allows more flexibility in when and for how long a property is rented out, which helps if it’s perhaps a holiday home you would like to use for yourself sometimes.
Renting a home for a short-term comes with slightly different risks compared with a tenancy agreement as short-term lets involve more frequent turnover and potential for damage. So standard home and most landlord insurance won’t give you the cover you need for letting a property via Airbnb – you will need a specialist policy.
How to compare landlord insurance
Just like when you compare standard home insurance, you will need to have lots of details about the property to hand.
You’ll need the address, the type and size of property, when it was built and how long you have owned the place. You’ll also need to get the property’s rebuild cost too. If you’re unsure on the rebuild cost of your property, the Association of British Insurers provides an online rebuild costs calculator.
As always, you will be asked about your claims history in the last five years.
If you are getting contents cover you will need to estimate the value of the contents for the ‘sum assured’. Do a room-by-room inventory of everything in the property, including outbuildings like sheds and garages to work out what it would cost to replace all of the furniture, appliances and other items you provide to your tenants.
You can add all this into a comparison website to get quotes back. As you study the list of quotes it’s important to read what’s covered in each policy you like the look of.
Some comprehensive policies will pay for alternative accommodation if a fire or flood leaves your rental uninhabitable.
These will be more expensive but it might be money well spent to get the right cover in place.
What about other types of insurance for landlords?
There’s also rent guarantee insurance to consider. This type of insurance specifically deals with unpaid rent.
It protects you as a landlord from potential financial hardship if your tenants don’t pay their rent while you seek repossession of the property.
Usually you are covered for rental payments for up to 12 months with a limit on the amount paid out.
It should also cover you for legal expenses associated with eviction, including court costs up to between £50,000 and £100,000.
This type of insurance is often an add-on to landlord cover. It might become more in demand when rule changes under the Renters' Rights Bill will make it more difficult for landlords to evict tenants who aren’t paying their rent.
A key element of the bill is the scrapping of Section 21 no-fault evictions. So this type of insurance could be invaluable in the event you find that rent payments stop.
