The Lowdown on Landlord Insurance

Published on July 25, 2017 by Sarah Mac

As a landlord, you don’t actually have a legal obligation to take specialist insurance cover, however with the numerous common issues that typically arise when letting residential property, and also the fact that as a rule, mortgage lenders demand it, landlord insurance could perhaps be considered something of a necessity.

Mortgage lenders will usually require that permission is sought by any borrowers planning on letting out the mortgaged property. The terms of the loan could well be considered breached if it isn’t, and the same goes for specialist insurance. Regular home insurance is rarely considered sufficient, as the risks are very different.

And there is good reason for this requirement. Numerous risks are associated with letting property. From damage to property to losses arising from tenant negligence; non-payment of rent and legal expenses, there is much to cover yourself for as a landlord.

There are plenty of insurance providers these days dealing with landlord insurance, and of course plenty of research and small print reading will be involved when selecting the right policy to suit your particular needs. To start with though, being aware of precisely what cover is required is important, and this will vary from one landlord to another. The good news is that policies can be built to fall in line with specific requirements.

What Insurance Cover is Crucial for Landlords?

The following insurances will protect your best interests, and of course financial interests, as a landlord:

Landlord liability insurance

Landlord liability insurance provides cover against the cost of claims arising from damage or injury sustained by a tenant or a visitor to your property due to a fault, such as an overlooked health and safety issue for example. If someone sues you for damages or makes a personal injury claim then this cover will take care of your legal defence costs and assist you in paying out any compensation awarded.

Landlord Contents Insurance

If you want to be able to claim for damage to the contents of your property, or for theft, then you’ll need contents insurance. Because the risk of damage is greater in a rental property, you won’t usually be covered on a standard contents insurance policy. Landlord contents insurance won’t cover you however for fair wear and tear, neither will it cover tenants’ own belongings, they’ll need their own policy for those.

Landlord Buildings Insurance

If your rental property suffers damage following a flood, a fire, a storm or vandalism then you will need cover to rebuild or repair it. Due to the risk of negligence by tenants, there is an increased likelihood of such events, which means a regular buildings insurance policy will not generally cover you.

Accidental Damage Insurance

Damage arising from accidental occurrences again is going to be a much higher risk when a property is tenanted. Broken windows; stained carpets; burnt worktops; smashed TV screens: all of these are fairly commonplace in a rental property and will be covered by a landlord accidental damage policy. You won’t be covered for wear and tear however, and unless your policy states otherwise, damage caused by pets or anything resulting from negligent workmanship won’t be honoured as a claim.

Loss of Rent Insurance

Fire, flood or vandalism can lead to a property becoming uninhabitable, which means you’re going to lose rental payments. You can take out cover for loss of rent, although you won’t be paid out if your tenants default on their payments. This can be covered, but it’s called tenant default insurance (see below), and is a completely different type of policy.

Alternative Accommodation Insurance

If your property does become uninhabitable, it may be a condition of your tenancy agreement that you have to provide alternative accommodation. Obviously this is going to bring with it a cost element which could be extremely costly without cover. Most alternative accommodation insurance policies set out specific events that are covered, such as fire or flood for example.

Tenant Default Insurance

Your rental property provides your much needed income. So what happens if it comes to a standstill? This is all too common, but thankfully you can cover yourself for a set period of lost rent. This cover usually kicks in once you’ve experienced a minimum of two months’ consecutive failed rent, and will depend upon you showing evidence of credit and due diligence checks.

Unoccupied Property Insurance

If you generally have vacant periods between lets then you could benefit from specialist cover that protects you from the added risks associated with an empty property. There will usually be warranties attached to the policy, such as certain security measures and making regular visits to the home.

Home Emergency Insurance

Many homeowners take out home emergency insurance so that any issue involving heating, drainage, plumbing or electrics is covered by a round the clock emergency call out service. For landlords this is particularly useful, as it removes the burden of responding to such issues as well as covering the cost. Of course you will need specialist landlord cover.

Landlord Legal Expenses Insurance

Landlords come across legal challenges fairly regularly. With legal expenses cover, there is the benefit of a round the clock legal helpline, which means access to professional guidance as and when you need it. You’ll also be covered for legal expenses in both making a claim, and defending actions. So if you wanted to take a tenant to court for rent arrears or to evict them, you’d have those expenses taken care of, as you would if a tenant took action against you for damages or negligence.

There is a lot more to landlord insurance than just a single policy, and it is important to consider exactly what you need and shop around for quotes. Often using an insurance broker is the wisest move, as they will do all the shopping around on your behalf, saving your valuable time and making sure you get the right cover for your particular level of risk.

Don’t ignore landlord insurance: to do so could be a false economy.

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