A buy to let property may provide you with a useful source of income, but owning one also carries some risks.
As a landlord, you could be faced with emergency repair bills, and there’s the possibility that the property stands empty for a period, leaving you without any rent coming in. Other risks involve, for example, being asked for a payout if your tenant makes a claim against you if they are hurt or their property is damaged while living in the property.
While it’s not a legal requirement to have landlord insurance, bear in mind that a standard home insurance policy will not cover you if you are letting the property to tenants. Therefore, taking out specialist landlord cover may provide peace of mind that you won’t be left out of pocket as a result of some of the specific risks you face.
Here we explain what landlord insurance is, what is and isn’t covered, and whether you might need it.
What is landlord insurance?
Landlord insurance is a specialist type of cover that provides financial protection for landlords against the main risks they may face when renting out a property. Typically, this type of policy will cover void periods when a rental property is empty between lets, and income is lost, as well as emergency maintenance and repairs which could even result in having to find another place for tenants to live until the issue is fixed. A policy may also cover liability if a tenant is injured while living in the property, although this may be offered as an optional add-on (see below)
If you take out a landlord insurance policy, you usually pay a monthly premium to provide insurance that if any of the events covered by the policy occur, you won’t have to foot the bill yourself.
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What does landlord insurance cover?
The specifics of what landlord insurance covers will vary from provider to provider, but in general most landlord insurance policies will cover the following:
- Damage to your property caused by your tenant
- Loss of rent or the cost for alternative accommodation if your tenants have to move out following, for example, a major maintenance issue
- Emergency repairs as well as overnight accommodation for your tenant if they aren’t able to stay in the property while repairs are carried out
- Claims made against you for injury or loss related to your rental property.
On top of the standard levels of cover, you may also choose from a number of add-ons to the policy, but you will usually be charged an additional premium for these.
What landlord insurance add-ons might you want to consider?
Your basic landlord insurance policy will usually cover the events outlined above, but there are also a number of add-ons that you might want to include:
- Landlord liability insurance – This may form part of a standard policy, but if it doesn’t you might want to consider adding this cover. If your tenant injures themselves in your property, for example falling over because of uneven flooring or an item falls on them, then you could be liable for a payout. This type of cover should protect you from the financial consequences of events such as these.
- Rent guarantee – If your tenant can’t pay the rent or has fallen into rent arrears, this provides you with protection for some or all of the income you would have otherwise had through rent payments.
- Home emergency cover – This helps to cover the cost of emergency repairs to, for example, boilers, plumbing, heating, drains, gutters, windows, doors, and security systems. Some providers may also provide a hotline of approved suppliers to call if necessary.
- Key care insurance – Pays out for locksmith fees if your tenant’s keys are lost, stolen or broken.
- Accidental and Malicious Damage Cover – Accidents happen, so if your tenant damages something in your property, this cover means that your wallet won’t feel the pain.
- Boiler and Heating Cover – If the boiler or heating systems break in your property, emergency repairs can be expensive. This cover helps to protect you from this unexpected financial hit.
What other insurance might you need as a landlord?
While landlord insurance is not a legal obligation, if you are the freeholder of your property and you have a mortgage on it, you will need to have buildings insurance. Even if you are lucky enough not to have a mortgage, it’s still a good idea to consider this cover. Buildings insurance covers the physical structure of your property and is designed to pay out enough for repairs or to rebuild your property if it’s damaged or destroyed. Policies will usually include things like outhouses such as garages and sheds, as well as fences, pipes, cables and drains up to a certain limit, but always check the small print carefully before buying.
You might also want to consider contents insurance, particularly if you have a furnished property, as this should cover any items you have provided. Even if you have an unfurnished property, contents insurance is usually still worth considering as it often covers things like curtains, carpets, and white goods, but again, check the policy details.
Some landlord insurance policies will include both buildings and contents insurance as standard, but this is not always the case, so make sure you know what’s covered.
Do I need landlord insurance?
As mentioned, landlord insurance isn’t a legal requirement for people renting out property to others and whether you need it will largely depend on your personal circumstances, your property and your tenants. In the UK, there are over 2.65m landlords, according to HMRC, and of this number, as many as one in 10 do not have landlord insurance.
Bear in mind, though, that your buy to let property is likely to be something that you have invested a considerable amount of money into, so it’s a good idea to protect both your investment and income you receive from it.
Where can I buy landlord insurance?
Several insurers offer landlord insurance including Direct Line, AXA and LV=, so as with any insurance, it’s a good idea to compare quotes from several providers before choosing a policy. There are insurance brokers which specialise in finding cover for buy to let properties, so it may be worth seeking professional help from one of them. The British Insurance Brokers Association (BIBA) can help you find a broker here or you can call them on 0370 950 1790.
If you’re considering purchasing a buy to let property and need mortgage advice, there are a number of mortgage brokers available on the market. If you’re looking for somewhere to start, we’ve partnered with an experienced mortgage advisor to offer Rest Less members high-quality advice on standard and buy to let mortgages. Book your free, no-obligation consultation here*.