Buy to let property insurance (also written as buy-to-let insurance) is a form of buildings and contents cover designed to specifically meet the requirements of landlords. It may also be referred to as:
- landlord insurance;
- insurance for landlords; or
- let property insurance.
Anyone can instantly become a landlord the moment they:
- start to rent out a property;
- rent out rooms or areas of a property they continue to occupy;
- rent out their home infrequently for things such as holiday peak-periods or as an Airbnb.
Once you cross that boundary, your insurance requirements automatically change too.
One of the most important facts to appreciate about buy-to-let cover is that you typically can’t use owner-occupier home buildings and contents policies to protect you. You need to get a fresh quote.
For a start, any existing owner-occupier home buildings and contents insurance will become invalid. It’s advisable to recognise that and deal with it in advance rather than wait until you have to make a claim and find the claim being rejected.
What you need is buy to let property cover that provides buildings and contents cover for landlords.
How is let property insurance different to home insurance?
It’s all to do with the risks involved. Insurers typically see the risks associated with a rental property as being higher than those of an owner-occupied one. For start, owning a rental property is classed as a business.
Common sense may tell you that, for example, however responsible they may be, tenants may not be quite as quick as an owner-occupier to spot and deal with a potential problem such as weeping water pipe joint.
In fact, landlord insurance provides more than just buildings and contents cover for rental properties – there are many extras that an form part of a policy or as an add-on.
What does landlord insurance cover?
Buy to let landlord insurance can be an essential part of any landlords’ toolkit.
The facts for a landlord are typically:
- your property is your business and generates income for you;
- it was probably expensive;
- if your investment is out-of-action, then your income will be zero.
Landlords’ insurance comes in various forms and different insurance providers will offer differing terms and conditions.
Typically, if you’re looking for buy to let insurance, you’ll need to ensure that your property is fully covered against:
- buildings – related risks such as subsidence and heave etc;
- natural disasters risks – including storms and floods etc;
- contents and fixtures – whether occurring as a result of the above or due to burglary etc.
Third party liability
Another thing arising from having tenants in your property is that you may be more at risk of being sued for third-party liability type accidents and injuries.
If your tenants, their visitors or in fact a passing member of the pubic, suffers injury or property damage as a result of your building, then they may sue you for compensation.
In the case of tenants, if they have an accident that is judged to have been as a result of a maintenance problem with your property, the awards against you potentially might be very significant indeed.
That’s also an area where buy to let property insurance will need to offer you protection that you consider adequate.
Accidental damage cover and cover for loss of rent
When you compare buy-to-let insurance quotes, do note that some policies include elements of protection (such as accidental damage, malicious damage by tenants, or cover for loss of rent) as standard. Others may offer the option to pay for these as add-ons.
What doesn’t buy-to-let insurance cover?
Buy to let insurance typically may not include employers’ liability insurance cover – that may in some circumstances be a legal requirement if you employ staff directly (such as cleaners).
In terms of employees, it’s a good idea to note that employers’ liability may even apply under law if you have people (including friends and family) doing odd jobs for you on a voluntary basis.
As we touched on above – buy-to-let insurance policies may vary at the individual policy level too – with the terms, conditions and benefits and features being slightly different to that offered by another landlord insurance provider. This includes exclusions.
That is why, when carrying out a landlord insurance comparison, it important to compare the quote and the cover offered on a like-for-like basis.
What happens if the property is unoccupied or being renovated?
Don’t forget that as a rented property yours may be empty from time to time in between rentals or it if is being renovated etc.
Empty is typically defined in property insurance as a period of more than 30-45 consecutive days unoccupied (this may vary depending on your provider). Typical landlords’ insurance won’t cover empty properties – in fact this rule generally applies to all types of buildings cover, such as home insurance.
As an example of the latter, if you have an extended holiday or are working away for more than 30 or 45 consecutive days, your existing home insurance may become invalid or only offer restricted cover.
What that means is that to ensure you have the most comprehensive cover for your property, it may be essential to add unoccupied property insurance when the need arises. Failure to do so could invalidate your existing insurance arrangements.
Your mortgage lender and landlord insurance
If you have a mortgage on your property, it may also be a condition of your agreement that you have suitable buildings insurance in place at all times. If you fail to do so, in theory your mortgage provider could demand that you pay back the full outstanding mortgage balance (including any interest) for breach of contract.
Speak to your insurance provider
If you wish to be confident that your business interests are protected, it’s important to declare openly when you’re applying for property insurance or getting insurance quotes that the use is buy-to-let or rental etc.
It’s equally important to inform your insurance company (and your mortgage provider) if you change the use of your property from owner-occupied to rental (in full or even part).
Failing to get this right may result in a future claim being rejected. Insurance companies do have methods of checking the actual occupancy status of a property in the event of a claim being made.
Buy to let landlords’ insurance – supplemented by unoccupied property insurance when required – could make your life a lot easier in the event of a crisis. So making sure you have suitable cover in place to protect your business is key.