If you’re on the cusp of becoming a landlord for the first time, you’ve probably got a lot on your mind, you may have ideas on joining a landlord association to help – but one of the more important things is likely to be landlord insurance. If you haven’t quite got your head around what it is and whether or not you need it, fear not – this beginner’s guide will help you to make an informed choice.
What is landlord insurance? Do you need it?
Picture the scene: your new tenant starts running a bath and decides to have a little lie down while he waits. Half an hour later he wakes up to a flooded bathroom and kitchen below, where the ceiling is now sagging and the light fitting is dripping. That 30-minute mistake would land you with significant electrical, building repair and redecoration bills, as well as potentially rendering the property uninhabitable while the work is carried out, meaning no rental payments for at least a month.
That’s where landlord insurance steps in. “Claims for things such as fire, flood or escape of water can run into thousands of pounds and take months to be completed, but if you’re insured then you’ll be paid for the cost of the repairs, as well as any loss of rent incurred because of the damage,” says Personal Lines Manager Clare Waring.
“Not only this,” she adds, “but if your tenant is injured and you are found to be negligent in some way, the policy would provide cover for your liability.”
Essentially, therefore, landlord insurance is very similar to standard home insurance, but it includes extra benefits (some optional) that have been tailored to the specific needs of landlords who are letting their properties out to tenants.
Read more: Landlord insurance vs home insurance
There is no legal requirement to have a landlord insurance policy in place, but if the property is purchased with a mortgage then 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, it’s no small investment!
Read more: Do I need landlord insurance?
Who is responsible for building insurance, landlord or tenant?
It is nearly always the landlord who is responsible for obtaining buildings insurance. That’s because the property is an asset that belongs to the landlord and therefore their risk if anything goes wrong. It’s in the landlord’s best interests to arrange their own cover, in order to ensure they’re protected against the risks they face. A tenant may be more inclined to opt for the cheapest, and possibly limited, cover instead. It’s important to note that it is generally a requirement for any mortgage agreement. The main exception to this is when a leaseholder owns a property and the freeholder makes it a condition of ownership that the buildings insurance is covered.
A tenant may, however, opt to buy contents for their personal possessions within the building, should it suffer damage or destruction. It is not, however, a legal requirement
What types of landlord insurance are there? What do they cover?
Landlord insurance falls 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, but the former focuses on the structure of the building, its fitted fixtures and outbuildings, while the latter is concerned with the movable items contained inside, such as furniture. The insurance will also differ depending on the rental type you have, take a look at some of the possible insurance you might need
Landlord buildings insurance – which is the type of cover a mortgage provider will require – usually also 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. The cover will likely be based on a set percentage of the buildings sum insured, which can vary from insurer to insurer but is usually a minimum of 20%. 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, too, 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.
You can opt for one or both of these categories of cover depending on your circumstances and the type of property you want to insure.
“If you own the leasehold of a flat, the buildings are usually covered by the freeholder under a block policy, so you would only need to select contents cover. This can be extended to include any parts of the building that your lease may make you responsible for, such as fitted kitchens and bathrooms,” Clare explains.
Read more: Do I need landlord insurance for a flat?
“Alternatively, if you own the freehold of a house, you would select buildings cover, and may or may not 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 within the buildings, in which case you wouldn’t need a contents policy to cover those.”
If you own the freehold of a house, you would select buildings cover, and may or may not wish to include contents, depending on whether you let the property furnished or unfurnished
Are there any add-ons to consider?
Indeed there are! First and foremost is a landlord legal expenses policy, which would provide cover should any of those dreaded property disputes arise, such as eviction, as well as repair and renovation disputes, health and safety prosecutions and tax investigations. The legal expenses policy can even be extended to include rent guarantee 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 protect’. This relates to the excesses (or amounts of money) you would have to contribute towards certain claims – just as you would with a car insurance policy. In the case of subsidence, for example, you’d probably face an excess of around £1,000, but with excess protect you should be able to claim this back, in addition to the cost of the repair work, under your buildings insurance policy.
Read more: What is insurance excess cover?
Finally, you may be offered home emergency cover, which provides support in the case of an emergency such as a plumbing problem, broken window, vermin infestation (rats, wasps, etc) or complete failure of the heating, hot water or electrical systems.
“At Alan Boswell Group, for example, we run a 24-hour, 365-day-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,” says Clare.
How much do landlord insurance policies cost?
As with any insurance policy, prices will vary between providers and a lot depends on your specific circumstances. In the case of landlord insurance, variable factors include the type of property, the area in which it’s located, and the sums insured. As a rough guide, average annual premiums are generally around £230, but a contents-only policy in a low-claim area could be as little as £56 per year.
Read more: How much is landlord insurance?
To find out exactly how much a landlord insurance policy will cost for you, getting an online quote is quick and easy. But if you need help – especially with complicated requirements or if you have a large number of properties – it’s always best to call in 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 affirms.
As a landlord, it can be tough not knowing what’s going on in your property at any given moment, or being there to make sure that hotplate is turned off; that door is locked; or that candle is extinguished. But taking out a landlord insurance policy could be one way to take the load off your mind and protect your investment.