The distinction between these two forms of property insurance cover is critically important and one that every landlord (and some owner-occupiers) must understand.
The basic outline
Most property owners will wish to protect the very substantial investment they have in their bricks and mortar. They usually look to property insurance to help them with that.
Property insurance itself comes in various shapes and sizes with much of that variation being attributable to how the provider of cover interprets the risks associated with a given property. Part of that risk assessment considers just how the property is being used.
In this context, that usage analysis includes an important distinction – whether it’s being used for letting or exclusively owner-occupier purposes.
That matters because insurers typically see let properties as constituting a different risk profile to those that are owner-occupied. So, a landlord letting property will need appropriate property insurance for the risks they face and that typically means landlord insurance rather than standard owner-occupier cover.
The bottom line
The reality is simple. If your property is being used for letting purposes, you must have specific landlord insurance cover. That typically applies even if you’re occupying your property and only letting out a part of it.
If you have owner-occupier home insurance for a property being used in full or part for generating rental income, any claims you might make against that policy may typically be refused if the provider discovers (which they probably would) that you were using it for letting purposes.
How cover differs
In addition to the basic appropriateness of the property cover component itself, you may find that landlord insurance varies in other respects too:
- it typically provides enhanced levels of third party liability cover. That’s necessary because having tenants in a property, as well as their visitors, means a higher likelihood of damage claims against you than might be the case with an owner-occupier;
- it may provide certain additional “business management” benefits commensurate with the fact that your property is your business. They might include things such as legal fees protection, cover for accidental or malicious damage caused by tenants, personal accident and loss of rental income. Some of these may be paid-for optional extras.
There are a few other points worth considering with respect to landlord insurance:
- if you have any form of buy-to-let mortgage, you probably signed a loan agreement committing to keep the property fully and appropriately insured at all times. If you subsequently only use owner-occupier property insurance cover, you might be in breach of contract and be liable to repay immediately the sum advanced;
- in Wales, Northern Ireland and Scotland, landlord registration schemes are now mandatory through devolved governments. In England, the system is based upon local authority regulations but some of those now also require mandatory registration. As part of that, you may be required to show that you have landlord insurance cover in place and if you do not, your registration might be refused.
If you’re using your property to generate any form of rental income, you are probably by definition a landlord.
If you wish to continue to protect the funds you have invested in your asset, you should ensure that you have landlord insurance in place.