Before considering just what landlords insurance covers, it may be helpful to understand why this specialist – practically niche – insurance product is needed in the first place.
There are other types of insurance offering cover for residential property, after all – the most obvious being the home building and contents insurance which any home owner occupier is likely to have taken the precaution of arranging.
The first question, therefore, is why cannot landlords simply use one of the very many standard home insurance policies on the market, as a means of protecting the bricks and mortar and the contents of residential property which happens to be let to tenants?
Distinguish between landlord insurance and standard home insurance
What matters to insurers, of course, is the question of risk – what is the likelihood of the insured property suffering loss or damage, such that the insurer needs to pay out on a claim. It is that calculation of risk which informs the price at which any insurer needs to pitch premiums for the cover in question, since it is only from income by way of premiums that insurers have the funds to pay out on claims.
Critical to that calculation of risk, as far as property insurance is concerned, is the use to which the premises are to be put:
- standard home building and contents insurance is designed to meet the risks faced by a typical property that is occupied on a more or less continuous basis by its owners;
- landlords’ insurance, on the other hand, is designed to meet the very different risks faced by a buy to let business, which relies upon rental income from the tenants occupying the premises – buy to let insurance (as landlord insurance is also called), therefore needs to provide protection for the business uses to which the property is put.
So, what does landlord insurance typically cover?
There are many variations on the type of landlord insurance available and it is important that you choose a policy suitable for the needs and circumstances of your own let property. Although the cost of getting it wrong might prove very expensive, you might find the range of choices overwhelming.
The complexities of landlord insurance are illustrated by a detailed guide on the Principles of Insurance which is published by the website Landlord Zone.
For that reason, you might want to draw on the expertise and experience we have developed here at Cover4LetProperty in helping you decide how any landlord insurance cover may be tailored to your individual requirements:
- as with any kind of business insurance, policies for landlords are also designed to protect and safeguard the principal assets of your business – in this case, clearly, the structure and fabric of the let property;
- cover typically extends to protection against major risks, such as flooding, fire, impacts (from vehicles and falling objects), escape of water, theft and vandalism;
- once again, however, policies may vary and some, for example, may exclude cover against the unlikely risk of subsidence, whilst others – like many of those we arrange here at Cover4LetProperty – exceptionally cover against the risk of malicious damage caused by your tenants or their visitors;
- the total building sum insured needs to take into account a worst-case scenario in which your property is totally destroyed and has to be rebuilt – a valuation based on current reconstruction costs (rather than the present market value, for instance) which naturally fluctuate over time and may need to be updated with reference to the index of reconstruction costs maintained by the Royal Institute of Chartered Surveyors (RICS);
- although your tenants are of course responsible for insuring their own possessions and belongings, you may own items – especially in the common areas of the let property – which also need to be protected against the risks of loss or damage through appropriate landlord’s contents insurance;
Loss of rental income
- remembering that your buy to let property is first and foremost a business asset, there is a risk that any one of the risks you have insured against leaves the accommodation temporarily uninhabitable, so that the income stream of your business – the rent you otherwise collect – is disrupted;
- landlord insurance therefore typically includes compensation for this loss of rental income in the event of a serious insured event;
Landlord’s liability insurance
- if any one of your tenants, their visitors, a neighbour or member of the general public is injured or has their property damaged in some way connected with your let property, you may face allegations of negligence in your duty of care and held liable;
- since this type of claim may reach very significant proportions, landlord insurance typically offers a minimum of £1 million indemnity against such claims.
What does landlord’s insurance cover? A great many, varied risks and perils likely to be faced by practically any investor in buy to let property.