What is buy to let insurance?

Posted: 4th Jun 2019

Buy to let property 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; 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 landlords’ insurance is that you typically can’t use owner-occupier home buildings and contents policies to protect you.

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 insurance 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.

This isn’t just a question of complicated statistics. 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, landlords’ insurance provides more than just buildings and contents cover.

What does landlords insurance cover?

Buy to let landlords’ 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 it’s 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-part 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.

What doesn’t let property insurance cover?

Buy to let insurance typically will 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.

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 insurance, 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 the bare minimum of cover.

What that means is that to ensure you have the most conprehensive 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 mortgage 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 financial interests are protected, it’s important to declare openly when you’re applying for property insurance that the use is buy-to-let or rental etc.

It’s equally important to inform your insurance company 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 and typically 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 is sensible.