When it comes to taking out landlord insurance, it was previously the case that private landlords would simply choose between whether they needed cover for a furnished or an unfurnished rental. In fact, for many landlords, this is still the case.
However, as the buy-to-let industry has grown and evolved in recent years, even in the face of attempts by the UK Government to reduce its size and impact, so has the number of landlord insurance products on the market.
While the number of landlord insurance products available on the market can leave you scratching your head, once you know what all the different products are, and what you need, it’s fairly simple to get your head around it and only focus on what your insurance requirements are.
The big thing you need to look out for with landlord insurance is that many policies may cover a “little bit of everything.” Your basic landlord insurance may include contents and legal fees cover, but perhaps not to the level you need to make you feel comfortable letting out your property. Likewise, there are many policies that will be very specific and cover you for what you’ve taken out and nothing else. For example, your policy may cover very specific types of building damage, but nothing else.
The beauty of most landlord insurance providers these days is that they enable you to tailor your policy to exactly what you need, in much the same way you can decide whether or not you want your car insurance to include windscreen cover and a courtesy car if you have an accident.
Here’s a look at the different types of landlord insurance products and their features.
This might be marketed as “Landlord Insurance” or “Buy-to-Let Insurance,” so be sure to check both what the name of the product actually means and what is covered.
Typically, buildings insurance will cover your property from any damage. This will include but is not limited to:
- Malicious damage caused either by tenants or someone else
- Natural disasters
Not every policy will cover every eventuality. It’s been well documented how reluctant some insurers are to provide some types of cover for homes deemed at a greater risk of flooding, for example.
Some buildings insurance will also cover any additional losses or costs that are incurred due to the damage itself, including:
- Damage caused by accessing a water leak
- Having to relocate tenants and/or cover their accommodation costs while the property is repaired
- Any loss of rent if tenants have to move out permanently and it will take time for the damage to be repaired
- If you need to rebuild the property in part or in full – just be aware that this will not usually cover the full value of the property, which may leave you in limbo if fire destroys a large portion of the property.
Areas that usually won’t be covered by buildings insurance – but remember to ask and check your own policy - include:
- External features such as the garden fence and gate.
- Damage caused by the property being used for illegal means. For example, if your tenant decided to grow cannabis and cut a hole in a ceiling or wall to pass wires through.
- Damage to outbuildings, such as the garage or shed, caused by extreme weather.
- Damage caused by water pipes that have been left exposed.
Insurers very rarely cover you for things considered wear and tear that occur naturally over time, such as damp.
Building insurance should be considered an essential product for all private landlords.
On the flip side of essential buildings insurance, we have the optional extra of contents insurance.
Whether or not you need or want contents insurance will depend on the type of let you are offering. For a fully furnished property then you should definitely take out contents insurance. And depending on the number of “white goods” you provide within the property, you may want to cover these even for unfurnished lets, too. In the latter circumstance you should make it clear to the tenant that they should take out contents insurance to cover their own belongings. Include it in the tenancy agreement for avoidance of doubt.
If you need to cover some of the contents you provide you will usually be able to do this alongside your buildings insurance without taking out another policy.
While contents insurance will cover everything you as the landlord provide, it usually won’t cover the following:
- Replacement of keys or changing of locks.
- Damage or theft relating to items kept in outbuildings, such as the garage or shed.
- Damage or theft relating to items kept in communal areas of the property.
Accidental Damage Cover
This usually isn’t included in most policies, but you should check whether you need it. Some insurers that don’t actually include malicious damage caused by a tenant in their buildings insurance may only cover it under an accidental damage policy. You should also consider the type of tenants you have; might letting to students lead to a greater possibility of accidental damage occurring, for example?
Just be sure to double check this. The last thing you want is to discover your tenant has gone on a rampage smashing up windows and ripping out your bannister, to then find out you have to pay for the repairs yourself because your insurer classes this as “accidental damage.”
Rent Guarantee Insurance
As its name implies, this insurance is in place to ensure the landlord gets their rent come what may. Landlords will usually invoke this when tenants fall into arrears, cannot pay the rent, or refuse to pay the rent. Depending on the level of rent guarantee cover in place the insurer will then cover the cost of some or all of the rent.
This is usually a complete standalone policy and you may need to use a different insurer to cover this.
When taking out rent guarantee insurance, be sure to check what it means for who you can let your property to. Insurers obviously want to cover themselves as far as possible against having to make a payment, and in this case it usually means strictly no letting to tenants in receipt of housing benefit or those whose references have returned anything less than perfect.
Legal Expenses Cover
Rent guarantee insurance will usually be sold alongside legal expenses cover, though again you should check as this is not always the case. If you only need one or the other you should also enquire as you may be able to reduce your costs here.
Legal expenses cover does what its name suggests, covering your costs should you ever need to take a tenant to court because they breach the terms of the tenancy agreement.
Look for policies that also cover you for evicting squatters – something most landlords think they’ll never have to do until the day they turn up and find uninvited, unwanted tenants enjoying their property – and that offer you a ‘grace period,’ allowing you to hold off payments until you have found new tenants having finally gained possession from the previous ones.
Maintenance, Emergency, and Boiler Cover Insurance
These policies tend to be with your utility providers rather than insurance companies and, as call out charges for boiler or electrical repairs usually won’t be covered in your regular policy, these policies can both give you peace of mind and pay for themselves very quickly.
For example, depending on who installed your boiler, you can get covered from anything between £5 - £20 per month and enjoy free service callouts and have certain repairs taken care of, too. Even if you’re renting out a new build where things are less prone to break down, this cover is still worthwhile.
Public Liability Insurance
Public liability insurance is usually included with most landlord insurance packages, but again be sure to check that it is, and what you’re actually covered for.
In essence, the public liability element of your insurance is covering you in case your tenant falls down the stairs and then sets the ambulance chasing solicitor brigade on your tail, alleging the carpet was loose or the bannister suddenly appeared out of nowhere. In theory it isn’t something you necessarily need, but like all insurance it’s better to have it and not need it than need it and not have it.
Do I Actually Need Landlord Insurance?
Of course you do, though there is not actually a legal requirement for you to have any insurance at all.
We’re not going to say what we’d call you if you came to us saying something had happened to your property and you weren’t insured, but put it this way; it’s a pretty foolish thing to do. After all, you’re protecting your property as your investment for what ultimately isn’t a big outgoing.
What would you rather do, pay a few hundred pounds, at most, to ensure you’re fully covered for every eventuality, or lose your entire investment in a fire or flood?
If you try to penny-pinch when it comes to landlord insurance, you will often get what you deserve.