Whether your buy to let property is the focus of a concerted business undertaking or whether you have fallen into the role as a more or less “accidental landlord”, the moment tenants are paying to rent your dwelling, you are almost certain to need landlord insurance.
Standard forms of insurance
When you arrange building and contents insurance for the home in which you are living, your insurer knows that you are the owner occupier – and the risks associated with providing the cover requested are calculated on that basis.
When the property is let to tenants, however, its use changes significantly and takes on the risks associated with any business use – in contrast to those when it is owner occupied.
That difference in use is critical to mortgage lenders – with the Council of Mortgage Lenders explaining how buy to let mortgages are quite different to standard residential mortgages for owner occupiers.
That difference is just as critical to insurers. So much so, in fact, that any standard home insurance you might have arranged to safeguard your home and its contents when you lived there as the owner occupier, is likely to be invalidated the moment it is occupied by tenants – that is when you need purpose designed let property insurance.
As we mention in one of our free guides, accidental landlords in particular might overlook this essential consideration – and do so at their peril if their let property is left only with invalidated standard home insurance.
Your buy to let mortgage
A further reason for needing landlord or let property insurance is because it is almost certain to be a condition of your buy to let mortgage that sufficient building insurance is always in place to at least cover the outstanding balance of your mortgage.
What buy to let insurance covers
In common with other forms of property insurance, the principal objective of landlord insurance is to safeguard the structure and fabric of the building against potentially serious damage from major risks such as floods, fire, storm damage, impacts (from vehicles and falling objects), vandalism and theft.
Since most landlords are likely to own at least some of the contents of the let property, the insurance typically may also provide cover against loss or damage of these.
Where let property insurance offers an especially important element of protection is in so-called landlord liability insurance. This offers indemnity against claims which may be made by tenants, their visitors, neighbours or members of the public who have been injured or had their own property damaged through some contact with the let property, for which they hold the landlord liable.
Landlord liability claims may reach substantial amounts and the amount of cover offered is typically at least £1 million.
Since the buy to let property is also a principal business asset – from which the income stream is generated from the rent collected – landlord insurance also offers compensation for the loss of rental income (up to prescribed limits) in the event of the property becoming uninhabitable – and therefore unlettable – following a major insured event.