Some landlords are fully committed buy to let investors with a view to making their living from the business. Others might have found themselves to be landlords almost by accident, thanks to a single property they might have inherited or one awaiting a decision on its possible sale. Either way you look at it, however, any landlord is likely to give priority to protecting the property with the appropriate form of insurance.
In order to understand why it is likely to be such a priority, it may be helpful to review cover for landlords and suggest a few tips about what needs to be taken into consideration:
Get the correct cover
Probably the single most important thing to remember is that your standard home insurance policy typically cannot offer the protection you need once the property is let to tenants.
You cannot use standard home insurance for a let property because each type of insurance is designed to cover different risks. Standard home insurance policies are typically designed for owner-occupied homes, meaning they assume the property is lived in by the owner and not rented out. When a property is rented to tenants, there are additional risks, such as:
- Higher liability: Letting a property introduces liability risks not covered by standard home insurance, like tenant injuries or damage caused by tenants that could lead to legal claims.
- Different cover needs: Rental properties face risks like intentional damage, unpaid rent, and periods of vacancy. Buy-to-let or landlord insurance policies specifically cover these risks, whereas a regular home insurance policy would likely exclude them.
- Building and contents requirements: Landlord insurance often provides protection for the building structure, fixtures, and certain contents left for tenant use, which isn’t usually covered in owner-occupied policies if rented out.
- Legal requirement: Mortgage lenders may require buy-to-let insurance for financed properties used as rentals. Using standard home insurance may breach mortgage terms, especially if a claim arises and it’s revealed that the property was being rented out. In this case, your mortgage provider could ask that you repay your outstanding mortgage balance immediately. If you are misleading an insurer about whether or not your property is let – you may be prosecuted for the offence of insurance fraud.
What does landlord insurance cover?
If you have a let property, then landlord insurance provides tailored cover to protect rental properties and their specific risks, ensuring that you’re not left unprotected if something goes wrong. Landlord insurance (also known as let property insurance) is a specialist form of cover – and there is a clear distinction between this and the type of home insurance typically arranged by the owner occupier.
Landlord insurance – or buy to let insurance as you might also see it described – of course varies in its precise details from one insurer to another. There are, however, certain core elements to most such policies:
Building insurance
- the let property is almost certain to represent a hefty investment and one which you want to safeguard by protecting its structure and fabric through building insurance – against such potentially major threats as flooding, storm damage, fire, impacts, escape of water and vandalism;
Contents insurance
- by the same token, the landlord may have spent a considerable furnishing and equipping the let property and contents insurance is designed to offer protection against loss or damage to those items owned by the landlord;
- responsibility for insuring possessions and belongings owned by the tenants, of course, is their own responsibility;
- some buy to let insurance policies also extend to cover, or offer the option of cover, against malicious damage to the let property or its contents by tenants – such as policies arranged by Cover4LetProperty and others;
Loss of rental income
- whether it is a large or small-scale project, letting a property is a business proposition, dependent for its success on maintaining rental income from tenants;
- in the event of an insured incident leaving the premises unfit for occupation by your tenants therefore, some landlord insurance policies typically offer at least some element of compensation for the resulting loss of rental income;
Landlord liability insurance
- the moment you become a landlord, you also take on a general responsibility for ensuring that your tenants come to no physical harm or have their property damaged;
- this is known as your duty of care and extends not only to tenants, but also their visitors and any other member of the public;
- if any of these suffers an injury or has their property damaged through some breach of your duty of care, a substantial sum in compensation may be ordered;
- to indemnify you against such claims, buy to let insurance typically includes landlord or property owner’s indemnity of at least £1 million;
Landlords’ statutory responsibilities
- it is important to keep in mind, however, that landlord insurance provides no defence against your failure to comply with other, statutory responsibilities and obligations you have towards your tenants;
- these include health and safety concerns such as the need for annual gas safety inspections – by a qualified Gas Safe engineer – safe electrical systems and appliances, compliance with national and local fire safety regulations, and, most recently, requirements for the installation of smoke alarms and, where appropriate, carbon monoxide alarms;
- you also have a responsibility for ensuring that any deposit taken from a tenant as security against damage and breakages is held by a government approved third party under the Tenancy Deposit Protection
Although there remain a number of responsibilities and obligations which you continue to shoulder as a landlord, therefore, there are also many risks and perils against which specialist insurance cover is available.
For more in depth information, please browse our website and check out some of our guides.
