If you have any kind of buy to let business – even as a part-time or “accidental” landlord – your most precious asset is likely to be the building itself. That is what makes landlord buildings insurance such an indispensable safeguard.
A closer look at buildings insurance for landlords may help to reveal just how it works, why it might be needed, and how it typically differs from other types of property insurance.
What is landlord buildings insurance?
This is an instance where the title does pretty much what it says. Landlord buildings insurance protects the building or buildings owned by the landlord against loss or damage.
It is typically incorporated into a complete landlord’s insurance – you can read more about landlords insurance here. Nonetheless, there are a few specific characteristics worth further consideration:
Definition and how it differs from standard home insurance
- if landlord buildings insurance protects the property against loss or damage, it’s fair to ask how this differs from the building insurance component of the standard home insurance arranged by homeowners;
- the difference, of course, lies in the contrast between the use of the two types of property – home insurance typically protects the property in which the owner lives, whereas landlord building insurance is designed to protect a property inhabited by paying tenants as part of the owner’s buy to let business;
- the landlord requires specific rental property buildings cover;
Why mortgage lenders often require buildings cover
- if you are a landlord, it is especially important to arrange the appropriate landlord building policy because your mortgage provider will almost certainly insist upon it;
- your mortgage provider does so to safeguard the outstanding mortgage loan – adequate buildings insurance helps to do just that;
- but note that lenders’ conditions may vary, and it is important to check the precise requirements of your mortgage agreement;
Buildings vs contents vs liability vs rent guarantee
- in addition to buildings insurance, landlord insurance policies may often include cover for the contents of the let property owned by the landlord, landlord liability indemnity insurance, and rent guarantee insurance;
- some of these additional elements of cover may be optional.
What landlord buildings insurance may typically cover
There are many and varied different providers of landlord buildings insurance. The precise elements of cover may also vary. To make sure you are arranging the buildings insurance appropriate for your rental property, you may need to read the policy wording carefully.
Some of the risks covered in landlord buildings insurance in the UK typically may include:
Damage to the structure
- including structural or other damage to walls, floors, or the roof of the property;
- following storm damage to the roof, for example;
Fire, smoke, and explosion
- fire, smoke damage, or even an explosion are clearly serious risks to the structure and fabric of your let property;
- the damage caused by a kitchen fire, for instance, might eventually require structural repairs and reinstatement;
Escape of water or oil
- an escape of water or oil can be a common reason for a residential property claim in the UK;
- a burst pipe or fractured fitting might cause extensive damage to multiple rooms in your let property;
Storm, flood, and subsidence
- while most landlord building policies are likely to provide cover against loss or damage caused by storms or flooding, subsidence may not always be covered unless specifically arranged;
- in areas where subsidence is a recognised risk – on ground above former mine workings, for example – subsidence may be subject to buildings insurance exclusions;
Theft and vandalism
- your landlord buildings insurance cover may typically extend to damage caused by vandalism or theft and attempted theft;
Replacement of locks and keys
- following any break-in or attempted intrusion, or even if you have simply lost your keys, certain policies may provide for the security of replacement locks and keys;
Outbuildings, garages, fences, and gates
- if your let property has a garden or other curtilage, the appropriate landlord building cover may also include the risks of loss or damage to features such as outbuildings, garages, fences, and gates;
Fixtures and fittings, including kitchens and bathrooms
- in a let property, in particular, damage may be caused to any number of fixtures and fittings, especially in the kitchen or bathroom;
- some policies may provide specific protection against such risks.
The outcome of any claims submitted under your landlord buildings policy is likely to depend upon the cause or causes of the loss or damage sustained, your maintenance history (any cover is almost certain to insist that the let property is maintained in a good state of repair), and any conditions, terms, or exclusions in the policy concerned.
Always make sure you understand what your let property insurance policy cover entails – or clarify with your insurance broker.
What landlord buildings insurance usually does not cover
As with any kind of general insurance, it is just as important to recognise what is excluded from the cover as what is included. Once again, specific exclusions are likely to vary from one insurer to another, but some of the more common are:
Wear and tear
- “wear and tear” is the insurer’s way of saying that all things age – there is a natural process of decline through wear and tear that can be distinguished from unexpected loss or damage;
Poor maintenance or neglect
- your insurer has the right to expect you to take all reasonable precautions to mitigate the risk of loss or damage;
- poor maintenance or neglect may be a reason for your contributory negligence in assessing a claim – or the claim’s rejection altogether;
Damage from long-term leaks
- long-term leaks suggest a failure to maintain the property in a good state of repair or to take sufficiently prompt remedial action;
- once again, the insurer might consider your contributory negligence in such a failure – or reject the claim altogether;
Pest or vermin damage
- some policies may specifically exclude damage caused by pests or vermin;
- your failure to eradicate the source of the damage (the pests or vermin) may be down to your contributory negligence in failing properly to maintain the let property;
Tenant-caused damage
- insurers typically draw a distinction between accidental and malicious damage – and the latter might be subject to exclusions;
- exceptionally, malicious damage caused by your tenants might be covered if the policy specifically includes such cover;
Undeclared commercial activities
- your let property might be used for commercial activities – by you or your tenants – that you have not told your insurer about;
- those commercial activities affect the insurer’s assessment of risks and may be considered a material fact – failure to inform the insurer may lead to exclusion;
Unoccupancy beyond stated policy limits
- an unoccupied property is more vulnerable than one that is regularly occupied;
- if there is a longer than usual void between tenants leaving and new ones moving in, your insurer may regard the property as unoccupied if the vacancy is longer than 45 to 60 consecutive days (the exact interval depending on the insurer’s particular policies);
- beyond that period, cover may become restricted or considered to have lapsed;
Renovation or structural work without insurer notification
- if significant structural changes are made to the building – alterations, extensions, or major refurbishment – a failure to inform your insurer may lead to the exclusion of loss or damage caused because of the building works. You typically may need renovation insurance/insurance for properties undergoing works.
In any of these or other situations, the onus is on you, the insured, to keep the insurer fully informed about any “material facts” – information that might affect the insurer’s assessment of the risks involved in providing the agreed cover.
Common exclusions
Please note that the following table is intended as a general overview only. The exclusions shown are examples of those commonly found in landlord buildings insurance policies, but the precise terms, conditions and exclusions may vary between insurers and individual policies. You should always refer to the specific policy wording and schedule provided by your insurer or insurance broker to understand exactly what is and is not covered.
| Exclusion | Reason | Notes |
| Wear and tear | A natural progression over time | Differs from the unexpected or accidental loss or damage otherwise covered |
| Poor maintenance/neglect | Failure to mitigate losses by maintaining a good state of repair | Can result in contributory negligence or rejection of any claim |
| Long-term leaks | Failure to repair or maintain | Contributory negligence or rejection of claim |
| Pests/vermin | Failure to eradicate in timely fashion | Contributory negligence or rejection of claim |
| Malicious damage by tenants | May be excluded | May be covered if specifically mentioned in policy agreement |
| Commercial activity | Likely to lead to rejection of any claim if insurer has not been notified | Notification may result in further conditions of cover and/or increased premium |
| Unoccupancy | After 45-60 consecutive days, insurer may regard the property as unoccupied and restrict extent of cover or consider it to have lapsed | Precise interval varies according to insurer. Unoccupied property insurance may be required |
| Building works | Building works involving any risk of structural damage may be excluded unless the insurer is informed | It might be necessary to arrange separate, standalone renovation insurance |
Buildings insurance requirements by property type
When assessing your proposal for landlord building cover, your insurer considers many factors, chief among which is the way in which your let property is used – with certain uses or categories leading to additional conditions or variations in the premium charged:
Single-family rental properties
- perhaps the most straightforward from the insurer’s point of view is a tenancy granted to a single family occupying the entire property;
Flats and leasehold arrangements
- in the case of flats and leasehold properties, the insurer may consider the nature of the tenure enjoyed by the owner;
Converted or subdivided houses
- the insurer is likely to consider the nature, extent and quality of the conversion or subdivision;
Multi-property portfolios
- if the insured owns and insures multiple rental properties, an opportunity exists for a closer relationship between the insured and insurer – with possible discounts in the premiums charged under portfolios insurance;
Older or non-standard construction
- older properties or those of non-standard construction pose greater risks for building insurance providers;
- the nature of those risks will be considered and further conditions applied or premiums adjusted accordingly.
How much landlord buildings insurance do you need?
To calculate the amount of buildings insurance you need – the total sum insured – it is prudent to assume a worst-case scenario in which your let property is destroyed and needs to be rebuilt.
The rebuild value is the actual cost of clearing the site, reconstruction of the property, and the fees charged by professionals such as architects, engineers, and lawyers. It is not the same as the building’s market value.
The Association of British Insurers (ABI) offers a free (at the time of writing) and user-friendly calculator of current rebuilding costs.
Aim to keep this total sum insured as accurate and as up to date as possible to avoid the danger of being underinsured. The total sum insured is the maximum amount your insurer may pay out by way of the settlement of a claim, so if you are underinsured you may be seriously out of pocket if you need to make a claim.
Landlord buildings insurance in the UK typically invokes an “average clause” if your property is underinsured because the cover is less than the building’s true reinstatement value. This reduces the amount of any settlement in proportion to the amount of underinsurance – even if the losses claimed are only partial.
How to help manage the cost of landlord buildings insurance
Careful management of your landlord buildings insurance may also help to reduce the cost of the premiums – in accordance with the insurer’s underwriting criteria and risk assessment.
Factors affecting that price may include the standard of security, a proactive approach to maintenance and inspections, an adjustment of excess limits, opting for a combined buildings and contents insurance policy, and combining several properties into a single insured portfolio, if that is appropriate.
You may wish to speak to your insurance broker for further clarification.
Checklist: what to look for in a landlord buildings policy
Landlord buildings policies are many and varied. It is important that you choose the most appropriate for your needs.
When choosing a policy, look for a clear statement of what is – and what is not – covered and any limits to that cover. This will also involve an understanding of the exclusions.
For any landlord, tenancy voids may be inevitable, but how long will your let property remain vacant before the insurer declares it to be unoccupied?
Are there any optional extensions to consider? Options might include cover against accidental damage or even malicious damage by your tenants.
A final test of any insurance might not come until you need to make a claim. Is the claims process sufficiently clear and well-defined?
Let us help
Every rental property is different, and the level of protection required can vary depending on factors such as the property type, its construction, occupancy arrangements, and any mortgage lender requirements.
If you are unsure about the level of buildings cover you may need, or if you have questions about the options available, you may wish to speak to a specialist broker.
At Cover4LetProperty, we have extensive experience in arranging insurance for a wide range of rental properties and can help you understand the options available so you can make an informed decision about the cover that may be appropriate for your circumstances.
We would be happy to discuss your requirements and help you review your existing arrangements if needed. Please call us today on 01702 606 301 where one of our UK-based team will be happy to help.
