What is Landlord Insurance?
Landlords insuranceis designed for the protection of property owners who are renting to tenants. A tenant is a person or group who has a rental agreement in place allowing them to inhabit the property. The tenancy agreement will set out your responsibilities as a landlord and often will specify the requirements for you to have the correct insurance in place.
Landlord insurance protects you as the property owner from financial losses connected to the rental, such as theft, fire, or weather damage and can be extended to include coverage for things like unpaid rent and malicious damage by tenants.
Do I need Landlord Insurance?
While you are not under legal obligation to obtain landlord insurance, your mortgage lender may require that you do so. Equally, your tenancy agreement may require certain responsibilities of you that are best served by an insurance agreement, especially if you want to avoid putting your financial future at risk.
What is the difference between landlord insurance and standard home insurance?
You may not feel or operate like a business, but by earning money through rent, you are for insurance purposes classified as one. While buildings insurance is standard with both insurance types, home insurance is not always suitable for a property which is let out, nor is it designed for the needs of a landlord. There will be gaps cover and won’t cover you adequately for the liability, legal and loss of rent options available on a landlord’s policy. Furthermore, renting and not telling your home insurer could invalidate your home insurance. To protect your earnings and your material assets, it’s sensible to choose a landlord insurance policy as soon as you start renting out your property.
What does landlord insurance cover?
Landlord insurance typically covers as standard:
- 1. Property owners’ liability cover
- 2. Buildings insurance
- 3. Loss of rent cover
- 4. Contents insurance
Optional covers include:
- 5. Accidental damage cover
- 6. Legal cover
- 7. Emergency assistance cover
Property Owners’ LiabilityCover
This is often the most misunderstood or overlooked by new landlords. Liability insurance for landlords is a type of public liability insurance that compensates loss, damage or injury to a third party and their property. The landlord is ultimately liable because it’s their responsibility to oversee that their property is adequately maintained and in a safe condition.
For example: A third party (e.g. a postman) trips on a loose slab in your drive way. You could be held liable in a compensation case.
How much should my Property Owners Liability (POL) be?
Limits usually are offered at £1m, £2m or £5m. It's difficult to foresee the potential size of a claim, but consideration should take into account the number of individual occupants within the property, as this impacts the potential aggregation of personal injury claims in the event of a serious accident. In general terms the higher limits of indemnity should be considered.
Buildings Insurance
You must insure your property for the rebuilding cost at today’s prices; this is one of the most important factors in protecting your property and vital you get it right. It exists to cover the costs for repairing damage right through to rebuilding - should it be needed. Imagine a fire sweeps the building out or a severe storm hits, leaving the property utterly inhabitable.
You should insure yourself for the full re-build cost of your property. Being under insured (meaning you state to your policy provider that the cost to rebuild your house is less than it actually is) will leave you vulnerable to paying the difference– as per the condition of average clause looked at below. Trying to save a few pounds on your insurance could effectively make it not worth while having in the first place.
Tip: There are various free re-build calculators online that can easily assist you in working out your re-build cost, such as the BCIS Public Rebuild Calculator.
Loss of Rent: Indemnity Period
Should the property become uninhabitable as a result of damage by an insured peril, the indemnity period is the maximum length of time ‘loss of rent’ can be claimed for after a loss.
How long should my indemnity period be?
12 months is the standard minimum on most policies. However, longer periods should be considered, taking account of the time taken to rebuild the property. Factors to consider are location, specialist design, construction period and for older properties if it’s a graded historical building. Don’t underestimate the time it takes for demolition and debris clearance, architects, planning and then rebuilding. As you can imagine, unforeseen delays can and do occur. Also check in your Tenancy Agreement as that may also specify a longer period, perhaps 24 or 36 months or even longer.
What does landlord contents insurance cover?
A great way to understand the difference between your ‘contents’ and your ‘building’ would be to (hypothetically) tip your house the wrong way up. Anything that would fall is considered contents. This would mean furniture and decorations are covered by contents insurance, but the walls, ceiling, sanitary ware and fitted kitchen / bedroom cabinets come under buildings insurance.
When renting a furnished property this becomes important and many policies offer a standard coverage. Make sure you know what this level is and decide if you need to increase the amount to reflect replacement as new prices.
Are my tenants responsible for their own contents insurance?
Yes, they are. You are not responsible for accidental damage to your tenant’s belongings. You can advise them to acquire their own tenant’s contents or student contents insurance policy.
Subsidence Insurance
If your property has suffered fromsubsidence – the downward movement of the structure or the ground supporting it - you will need to declare this during a quotation. It is vital that you do so, or you risk further complications caused by subsidence remaining uninsured.
You will need to provide proof that the issue has been checked by a professional and although it will most likely raise your premium, a specialist insurer should not have a problem sourcing you a policy that provides adequate cover based on a case-by-case consideration.
Optional Cover for
Landlord’s Insurance
Accidental damage cover
This is not always offered as standard, so be sure to make clear during your quote that you want accidental damage coverage included.
Accidental damage is considered damage to the property not classed under another insurable peril. Examples include:
- Foot through the loft.
- Nail through pipe.
This is specifically to cover accidental damage caused by you. Accidental damage when caused by you tenant is usually covered by their deposit or even potentially their own insurance. Please refer to our tenant damage section for more details.
Legal cover
This is help with legal fees when taking someone to court for non-payment or equally when defending someone taking the landlord to court. Legal cover is not usually found as a standard policy feature but can be requested as an optional add-on to your policy. As a landlord you will have specialist requirements and you should speak to an advisor to discuss the costs and level of coverage you might be interested in.
Tenant damage cover
Tenants are considered to be on your property with your permission, which is why this type of cover is not a standard requirement. If an incident arose where tenants were to accidentally damage or intentionally cause malicious damage beyond the value of their deposit, this option would keep you covered for the costs.
If an incident arose where tenants were to intentionally cause malicious damage beyond the value of their deposit, this option will keep you covered for the costs.
Emergency assistance cover
Emergency assistance cover for landlords is an extra level of cover that some insurers provide as an additional cover on landlord insurance. Typically policies include a combination of the following elements:
Boiler cover
A boiler break down can be a great cause of frustration and even cause health risks for tenants, especially in winter. Making sure you have your boiler covered with a quick incident response time means you can rest easy should something go wrong. The sudden failure or breakdown of your boiler is not included as standard on a landlord insurance policies. Usually you would arrange supplementary cover through a third party like British Gas.
Plumbing and drainage cover
Sudden damage to the home’s plumbing and drainage system caused by breakage or blockage and flooding. Drainage issues often arise in the autumn, as levels of rain increase and fallen leaves block up the gutters. If left untreated, water damages produced by plumbing and drainage issues can result in other issues such as mould.
Home security cover
If its windows or doors become damaged the house becomes insecure, which could result in theft or environmental damage to your property. Making sure that a broken door or window is replaced swiftly mitigates that risk, helping your tenants to sleep soundly.
Power cover
Should there be problems with domestic power outage, leaving your tenants literally in the dark, this element of your emergency cover will get an electrician sent out within 24 hours, making the sure the problem is solved swiftly.
Lost keys cover
If the only set of keys to the home are lost or stolen, preventing access, then lost key coverage can save the day by providing access to the property. These things happen!
Vermin cover
Sometimes the critters try to get the best of us. With vermin cover, you can make sure an infestation is dealt with swiftly and professionally, protecting your property and the wellbeing of your tenants. This covers mice, rats, wasps and hornets. This is generally excluded from standard landlord insurance policies.
Roof cover
Another risk, especially during the blusterier seasons, is damage to the roof of your property. If something does happen which has or is likely to cause internal damage than the roofing feature of emergency assistance will have you covered.
To learn more about emergency assistance and other optional landlord insurance covers, request the policy documents and discuss with an advisor to find the right cover for you.
Advice for Landlords
Choosing a Cover
Landlord Insurance for Unoccupied Property
Unoccupied properties are much more susceptible to break-ins, petty crime, squatting etc. As such, insurers generally exclude unoccupied properties from their policies as standard. If the property becomes temporarily unoccupied during a changeover of tenants or a renovation, many policies will maintain full cover for a certain amount of time, usually around 30 days. After this time period some of the cover will automatically be restricted and you’ll be asked to switch off mains services, drain water /heating systems and make regular recorded inspections.
You should always inform your insurers of any unoccupancy and check your policy to fully understand how your cover is affected. In some instances of long term unoccupancy specialist unoccupied property insurance may need to be arranged.
Understand Limitations of Accidental Damage
It is always advised you make yourself aware of the accidental damage exclusions of any policy you consider. Typically these will exclude claims that are ‘inevitable’ such as wear, tear and deterioration.. Discussing these and other exclusions will help you understand your side of the insurance agreement, such as expected levels of maintenance (plumbing, tree surgery), and what in turn you can expect your insurer to cover.
Landlord Insurance for Multiple Properties
You will often be able to get a discount for insuring multiple properties on one portfolio. Premiums can get lower with some insurers and large discounts on admin fees. You can add newly purchased properties pro rata to existing policies allowing the policies on all properties to finish and renew at the same time. You'll need to speak with a specialist insurance provider but they'll often be able to find you a great deal by comparing quotes from a number of insurers.
Money Back
As with many commercial policies, you may not have a cooling off period affording free cancellation once your policy has been purchased. Check this during the quotation to make sure you are fully aware of what your options are.
Further Tips for Landlords
Rent Guarantees
Landlord rent guarantees are not part of landlord insurance policies but something offered by agencies to cover you if your tenant doesn’t pay. This is different to loss of rent cover, which can only be claimed when an insured peril, like a fire, has caused damage that prevents your tenant from inhabiting the property.
Renting to DSS tenants
If you choose to rent to DSS tenants, it’s worth taking some precautionary steps to avoid any issues around rent payment. Here’s a few tips:
- 1. Ask how they will pay you rent –, cash, credit, direct debit.
- 2. Ask how much of their rent is covered by the financial support they receive, and what’s the shortfall?
- 3. Ask how they intend to cover the shortfall.
- 4. Consider & discuss whether weekly rent payments, rather than monthly, is more suitable.
- 5. As with all prospective tenants, make sure you check their rental history.
- 6. Declare the tenant to the local council, so council tax bills are made out to them.
Tenant referencing
Landlords are wise to properly vet their tenants to confirm their financial status and references. It makes good business sense to know who you are signing agreements with. This is a quick and relatively in-expensive service that can even be done online. We have a partner service we recommend here. Alternatively, some independent landlords prefer to do this themselves.
Subletting and landlord insurance
With the rise of the sharing economy in the shape of companies like Airbnb, subletting has become ever more popular. It’s important to speak to your tenants about subletting from the start of their tenancy so they understand the impact it may have – both on your landlord insurance and on your mortgage. Speak to an advisor if you want to discuss your options when it comes to extending your landlord insurance to cover subletting.
