Landlord insurance: a beginner's guide
By Alan Boswell Group
- What is landlord insurance?
- Do you need landlords insurance?
- Who is responsible for buildings insurance - landlord or tenant?
- What types of landlord insurance are there?
- Are there any add-ons to consider?
- How much do landlord insurance policies cost?
- How to compare landlord insurance
- Why should you use an independent insurance broker?
In this article
- What is landlord insurance?
- Do you need landlords insurance?
- Who is responsible for buildings insurance - landlord or tenant?
- What types of landlord insurance are there?
- Are there any add-ons to consider?
- How much do landlord insurance policies cost?
- How to compare landlord insurance
- Why should you use an independent insurance broker?
With an estimated 2.5 million landlords in the UK, buy-to-let properties are a popular way to generate an extra income and a relatively stable financial investment for the future. But, being a landlord brings its own responsibilities.
Whether you join a landlord association or go it alone, one of the most important things to do is ensure your investment is fully protected with appropriate insurance.
It’s tempting to try to save money on your landlord insurance, especially when there are various other costs you have to take into account, but before you shop around you should always make sure you know exactly what you’re shopping for.
Here we look at what landlord insurance is and why you need it.
What is landlord insurance?
Landlord insurance is a policy that gives a landlord financial protection when they rent out their property to tenants. It is normally made up of a variety of optional policies, including buildings insurance, contents insurance, property owner’s liability, loss of rent, accidental damage, home emergency cover, and rent guarantee.
Do you need landlords insurance?
Essentially, landlord insurance has some similarities with standard home insurance, but it includes extra benefits that have been tailored to the specific needs of landlords who are letting their properties to tenants, and the additional risk that this brings.
There is no legal requirement to have a landlord insurance policy in place, but if the property is purchased with a mortgage it is likely to be a requirement of your mortgage provider.
Even if you’re buying your property outright, there’s still a strong argument in favour of taking out a landlord insurance policy to protect it – after all, buying property is no small investment.
As a landlord, it can be tough not knowing what’s going on in your property at any given moment, but taking out a landlord insurance policy is one way to take the load off your mind and protect your investment.
Let’s take a look at an example:
Due to an electrical fault with the cooker supplied by the landlord at the property, a fire breaks out. Thankfully, the emergency services are able to extinguish the fire quickly and the damage is minor and mainly cosmetic. However, whilst repair work is undertaken the property is uninhabitable as there is no access to cooking facilities and alternative accommodation has to be found for the tenant. In this case, landlord insurance would cover the cost of the repairs, along with alternative accommodation for the tenant and the lost rent whilst the property is uninhabitable.
This is just one instance of where landlord insurance would protect your investment.
Claims for insured events such as fire, flood or escape of water can run into thousands of pounds and take months to be completed, but if you’re appropriately insured then you’ll be covered for the cost of the repairs, as well as for any loss of rent incurred because of the damage. If your tenant is injured and you are found to be negligent in some way, the policy would provide cover for your liability.
Who is responsible for buildings insurance – landlord or tenant?
In most cases the landlord is responsible for obtaining buildings insurance. That’s because the property is an asset that belongs to the landlord and therefore it’s the landlord’s risk if anything goes wrong.
In the case of leasehold properties, it is generally the freeholder who is responsible for the buildings insurance. However, if you are the leaseholder it is important that you check the terms of your contract; it may be a condition of your ownership that you arrange the buildings insurance instead.
What types of landlord insurance are there?
The main components of landlord insurance fall into two categories: buildings and contents.
Both offer protection against risks such as fire, theft, malicious damage, flood, escape of water, subsidence and accidental damage. Buildings insurance focuses on the structure of the building, fitted fixtures and outbuildings, while contents insurance is concerned with the movable items contained inside, such as furniture that the landlord may have left in the property.
A tenant may, however, opt to buy contents insurance for their personal possessions within the building, in case of damage or destruction. It is not, however, a legal requirement for them to do so.
Buildings insurance – which is the type of cover a mortgage provider will require you to have – usually includes loss of rent cover as standard, protecting you against lost rental income following a claim if your tenant has to move out while repair work takes place.
It’s an option that can often be added to a contents-only policy if required, with the level of cover based on your annual rental income.
Public/property owners’ liability is usually included in a buildings insurance policy and provides cover for claims made against you as a result of injury to any individual or damage to another person’s property. Again, the finer details may vary between insurers, but the minimum cover is usually £2,000,000.If you own the leasehold for a flat, the building is usually covered by the freeholder under a block policy, so the landlord would only need to have contents cover for any furniture or furnishings they have provided. This can be extended to include other parts of the building, such as fitted kitchens and bathrooms, if these are your responsibility on the lease agreement.
Alternatively, if you own the freehold of a building, you would select buildings cover, and you may wish to include contents, depending on whether you let the property furnished or unfurnished.
Some landlord policies, such as those offered by Alan Boswell Group, include carpets, curtains and white goods under buildings insurance, in which case you wouldn’t need a contents policy to cover those.
Are there any add-ons to consider?
First and foremost is a landlord legal expenses policy, which provides cover should any property dispute such as an eviction arise, as well as repair and renovation disputes, health and safety prosecutions and tax investigations. A legal expenses policy can be extended to include rent protection insurance in many cases, which would cover rental income lost while a potentially lengthy eviction is taking place.
Another policy option you may come across is landlord excess protection. This policy covers the cost of your policy excess if you make a claim on your insurance. In the case of subsidence, for example, you’d probably face an excess of about £1,000 but with excess protection you should be able to claim this back, in addition to the cost of the repair work, under your buildings insurance policy.
You might also be offered home emergency cover, which provides support in the case of an emergency such as a plumbing problem, a broken window, vermin infestation or the complete failure of the heating, hot water or electrical systems. Clare says: “At Alan Boswell Group, for example, we run a 24-hour, 365-days-a-year helpline for policyholders, with a network of engineers we can call upon to visit the properties and make them safe and secure in an emergency.”
How much do landlord insurance policies cost?
If you went out to buy a car, you’d like to think you’re going to get a steering wheel and four wheels – but you’d be foolish not to look under the bonnet or check the safety features, the warranty and the running costs.
You’d also probably be quite happy to consider added benefits or optional extras. One thing is for certain: you wouldn’t just go for the cheapest car you could find. If you did, you wouldn’t expect a lot in return.
It’s the same with landlord insurance. If you go for the cheapest option, you might end up with inferior cover – large excesses, limited cover and an almost non-existent support package. But if you’re prepared to pay a bit more your cover will improve accordingly.
Prices will vary between providers and a lot depends on your specific circumstances as well as the number of add-ons you choose to include. Variable factors include the type of property, where it’s located and the sums insured.
To find out exactly how much a landlord insurance policy will cost you, get an online quote, which is quick and easy. But if you need help – especially if you have complicated requirements or a large number of properties – it’s always best to call the experts.
“An experienced, specialist insurance broker can provide advice on the type of cover you need, and explain the policies in more detail, including terms, conditions and exclusions – all based on your specific requirements,” Clare says.
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How to compare landlord insurance
There are many different features with landlord insurance policies so it can be tricky to make a choice when you’re comparing them.
But following our top ten tips can help you.
1) Landlord insurance rather than home insurance
The first thing to do is to make sure the policy you go for is landlord insurance rather than a more standard home insurance policy. Home insurance is not sufficient if you are renting out a property.
2) Fees for changes or cancellation
Getting cheap premiums is always a good thing, but any savings could be wiped out if you have to pay expensive fees to change the policy later on.
3) A UK-based claims service
Ensuring you deal with a UK-based company without outsourced call centres should ensure you get the correct level of service.
4) Loss of rent
If you need to make a claim, most landlord products should include cover to provide an income while the property remains uninhabitable.
5) Cover for malicious damage by tenants
Malicious damage by a tenant is a surprisingly common claim. When buying landlord insurance, check that malicious damage cover is included as it may be an add-on that you need to specifically request.
6) Excesses
Some types of claims can have higher excesses applied. Escape of water is the most common property claim and will often come with a higher excess. Make sure you read the policy carefully and are happy with what you’re signing.
7) Terms and conditions
It’s essential you follow the terms and conditions of the policy. An example of this is ensuring there’s a tenancy agreement. This might sound obvious, but you need to draw one up even if you are letting to your friends or family otherwise you could be invalidating your policy.
8) Cover for the manufacture of drugs
This is specific cover in case a tenant damages your property through drug production. Cannabis farms, for example, can lead to the destruction of properties, and failure to have this can destroy your investment.
9) Unoccupancy rules
The average length of a tenancy is less than a year, so you’re likely to have some period of unoccupancy. The cover that’s provided for unoccupied properties varies, so make sure you know what happens with your policy.
10) Independent research
Whether through product comparisons or reviews, do some online research to find out if the insurance provider you’re about to place your trust in has the trust of its customers. We’re proud of our outstanding, independent customer reviews, which you can read on Feefo.
Why should you use an independent insurance broker?
Comparison sites don’t offer advice. Insurance companies try to sell you their products, and only their products. Insurance brokers can offer advice but might be beholden to specific insurance companies. We know that every landlord has different needs and it’s important to take a tailored approach to finding the correct insurance for your property and risks. You can find plenty more advice and specialist landlord insurance products on our landlords insurance hub. Or if you're more of a numbers person, have a read through our landlords insurance statistics page.
But independent insurance brokers can take the time to listen to your needs and offer you independent advice and explain what the right package is for you.
At Alan Boswell Group, we’ve been named Independent Broker of the Year, and our landlord products have won a whole host of accolades including, Top Landlord Insurance Provider 2022 by Bought By Many and Which? and Best Landlord Insurance Provider 2019 at the London Landlord Accreditation Scheme Awards.
We have more than 30 years’ experience in the sector and offer five-star-rated landlord insurance products at highly competitive prices.
Read more: Do I need landlord insurance for a flat?