Landlord Insurance

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If you’re a landlord or thinking of purchasing a property to make a rental income in the future, taking out the correct landlord insurance is a vital point to consider as it will protect your tenants and your property, should anything go wrong.

Equally, landlord insurance is important if you are renting a property as a professional business and not just as a second-income generator. You might have the perfect tenants, but accidents and events, sometimes out of anyone’s control, still often occur. Did you know for example, the weather accounts for the largest percentage of home insurance claims in the UK?

Whatever the cause, damages to your property could cost a lot of money to put right, so it is important you are covered to prevent yourself from experiencing any monetary downfalls.

We understand that landlord insurance can be a confusing concept to tackle. We have therefore created an ultimate guide to Landlord insurance, which will hopefully make choosing the right policy an easier process.

What is landlord insurance?

Landlord insurance is an insurance policy that will protect a landlord or professional business when renting out properties to tenants.

If anything goes wrong with the property, whether that be due to a faulty boiler, a fire, or even accidental flood damage, the property owner will be protected from any financial losses.

Landlord insurance is not a single product but is instead combined with various other levels of cover.

This means landlords are protected against varying elements, including failed rent payments, times when the property is empty between old and new tenants, damage to the property itself and for any damage caused to contents within the property that the landlord might own.

If you are renting out commercial buildings such as offices, for example, you will need commercial property insurance, not a standard landlord insurance policy.

Why do I need landlord insurance?

Landlord insurance is not a legal requirement, but it could prevent you from facing any hefty bills due to anything going wrong in the property. This isn’t to say the tenants will be at fault.

Often properties wear over time. Old pipes might start to leak, frail window frames might start to rot, but whatever the reason, taking out landlord insurance will mean you are covered in all circumstances.

Landlord insurance is also important as a standard home insurance policy will not cover the property if it is being rented to tenants.

This is because more problems are likely to arise in the absence of the owner. If the landlord is not living at the address, some tenants may pay less care and attention to maintenance issues.

Problems such as damp may be ignored and get out of hand, resulting in damage which could cost thousands to put right. Some tenants, though not all, may even cause damage to the property on purpose or through reckless behaviour.

There is also the issue of injury caused to tenants, which landlords could be held liable for, if a claim is made. With all these points in mind, you can see that regular home insurance will not provide enough protection for landlords, which is why it is so important to get the correct landlord insurance policy to cover your needs.

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Types of landlord cover

There are several types of landlord insurance cover you may need, dependant on your circumstances. Here is a breakdown of the main types of landlord insurance:

  • Buildings cover
  • Contents cover
  • Accidental damage cover
  • Liability insurance
  • Employers’ liability insurance
  • Loss of rent insurance
  • Tenant default cover
  • Legal expenses insurance
  • Landlord emergency cover
  • Alternative accommodation insurance

Buildings cover

This is the most basic but also the most important type of insurance policy. It covers exactly what is says in the title – the building, so should any repairs or work be required due to damage, you will be protected against the cost of carrying out the work to get the damage fixed.

It is common practice for banks and building societies to include having building insurance as a condition of a mortgage, so if you are buying a property, you will need to have building insurance in place before the mortgage is granted.

Having the right buildings insurance in place may mean you will be financially protected against any of the following:

  • Damage caused by vehicle collisions
  • Damage caused by animals or pets
  • Damage caused by machinery
  • Damage caused by the weather, such as earthquakes, floods lightening and storms
  • Damage cause by subsidence within the building
  • Damage caused by tenants, such as vandalism or careless behaviour
  • Damage to any installations for water, drainage or heating

Although most buildings insurance policies will cover the above types of damage as a minimum, it is important to check with your insurance provider exactly what the policy will include.

Your insurer will also want to know the rebuild cost of your property before they finalise your policy, so it might be a good idea to have an idea of this before looking into your options.

Contents cover

Landlord content cover is designed to protect any items within the household that belong to you as a landlord or business. If any content is damaged or stolen, the cost of replacing or repairing these items will be covered under this type of policy. Any personal possessions belonging to the tenant are their sole responsibility, so you will not need to take out protection to cover their items.

Where a property is fully furnished, it is a good idea to take out a more comprehensive insurance policy which will cover most items such as white goods, furniture, carpets, decorative items and even more expensive items like TVS or computers.

Even if your property is unfurnished, you may still want to get cover for items such as white goods or carpets, if they are included.

Certain factors will determine how much you pay for your landlord content cover. These include:

  • The location of your property – some locations may have a higher crime rate than others, so the risk of theft or burglary may be greater.
  • The profession of the tenant occupying your property – you are more likely to have a higher premium if you are renting out to students than to professional individuals for example.

Accidental damage cover

This type of insurance is usually an add on to landlord content insurance. It will provide cover for any of your personal items within your property, if they were to be accidentally damaged.

This could be anything from a smashed TV screen, to a broken chair from an expensive dining room table.

Liability insurance

In the event of injury or death of an individual at your property, it is essential you are protected in case a claim is made against you. Landlords liability insurance is similar to public liability insurance.

Should a tenant try to sue you, any legal expenses will be covered. If your tenant is on housing benefit, or a student at university, it is common practise for the university or local authority to request a minimum level of liability cover.

Employers’ liability insurance

This type of insurance is pretty much the same as landlord’s liability insurance, however it offers protection should a person you employ become injured.

This will only apply if you employ somebody to do work on your property, such as a cleaner, gardener or handyman. The employment might be on a causal, one-off basis, but it is still better to protect yourself in case anything serious happens and a potential expensive claim is made against you.

Loss of rent insurance

If your property becomes uninhabitable for any reason, it may not be suitable for your tenants to live at the property whilst any work is being carried out.

Similarly, if you find your property is in a state of disarray due to previous tenants’ negligence, you may not be able to rent it to new tenants until the repairs have been completed.

This means you will not have the rental income you previously received during this period. This type of cover is particularly important if you rely on the rental income to pay your mortgage, or for any other bills that are important.

Loss of rent insurance will therefore cover you in such scenarios.

Tenant default cover

There is often confusion between loss of rent insurance and tenant default cover.

It is important to recognise that loss of rent insurance does not provide protection in the event of a tenant defaulting on their rent payments.

To cover any missed payments, you will need to take out tenant default cover as an add on to your policy. It is important to bear in mind that the amount of cover is usually capped and only applies for a certain period.

You should discuss this with in more detail with your insurance provider.

Legal expenses insurance

Should you wish to take legal action against your tenant for unpaid rent, the costs involved can be extremely expensive.

Legal expenses insurance will cover you, should such an event arise.

It will also cover the costs involved in settling disputes with tenants in court, repossessing the property, as well as defence against any criminal action.

Landlord emergency cover

We all know how frustrating it can be when we have an emergency at home, whether that be a boiler breaking, a window smashing, or we lose our house keys.

The same scenarios can happen to landlords and this can be even more frustrating if the landlord is not employing a letting agency who can deal with these issues straight away.

Landlord emergency cover is a particularly favourable policy as it often provides a 24-hour tradesmen service to deal with these problems.

Many landlords work full time and simply won’t have the availability to tackle such issues, so insuring your tenants have access to around the clock assistance is sure to be a handy add on to your policy.

Alternative accommodation insurance

In the unfortunate event where an emergency makes the property uninhabitable, alternative accommodation insurance could provide your tenant with a place to stay, until the repairs are carried out.

It is important to recognise however that this type of cover will only be necessary if there is a term in your tenancy agreement that states you will cover the cost of alternative accommodation if the property becomes uninhabitable.

It might be a good idea to check through your tenancy agreement beforehand to ensure you are not paying for any unnecessary cover.

How much does it cost?

The amount you will have to pay for landlord insurance depends on varying factors.

These include specific details of the property, like the location, size and age of the building and the types of tenants that reside there.

Different types of cover levels will have different costings, so it is important you choose a policy that is right for you. When considering landlord insurance, it is worth recognising that insurance companies will base your premium on the likelihood of you making a claim and how much that claim is likely to cost.

What level of landlord insurance cover will I need?

The amount of cover you will need should be based on the rebuild or replacement values of the property or its content.

When considering building insurance, you should base the level of cover on the amount it would cost to rebuild your property from scratch.

This will include the cost of labour and materials. Often this element is confused with market value, so be careful not to estimate your level of cover on this factor.

Working out this cost is a very daunting and difficult task, but the good news is you can hire a surveyor to help you.

Similarly, the level of landlord’s content insurance should be based on the amount it would cost to replace all your contents within the property.

Before renting out a property, it might be a good idea to dig out any receipts of the items that will be available to tenants, if you have them, as this might make estimating the value of your contents that little bit easier.

How can I save money?

There are several ways you could ensure your landlord insurance isn’t too expensive, so let’s explore your options.

Compare policies

With thousands of insurance providers in the market, it is easy to pick the first one you see and be tricked into believing their price is the best.

To save on your expenses, you should compare landlord insurance policies online to find the best deals.

Combine multiple landlord insurance policies into one

It is often cheaper to package several policies into one. Landlords have a number of insurance needs, including liability insurance, buildings and contents insurance, unoccupied property insurance and tenant default cover.

Most insurance companies will offer you all of these under one policy which often work out better value for money.

Make sure you have the correct re-build value

Providing a rebuild value for your property is a vital piece of information you need before you can purchase landlord buildings insurance, however this is commonly assumed to be the same as the market value of the property.

This is not the case, the rebuild value is the estimated cost of rebuilding your property from scratch, including the cost of material and labour.

If your estimate is not realistic, you could be faced with paying the extra costs to compensate the difference or end up paying for an expensive premium that you don’t need.

A surveyor can help you with your estimates, and although you may think this is another added expense, it would prove beneficial in the long run if you were to make a claim based on underestimated or overestimated rebuild values.

Increase voluntary excesses

As with any insurance policy, the higher the excess, the cheaper it will be overall, and this is the same for landlord insurance.

If you are in a position in which you can afford to pay out for a higher excess, it could save you money in the long run.

Only purchased required cover

It is important not to take out any insurance that you don’t need. For example, there is no need to take out additional accommodation cover if there is no clause in the tenancy agreement that states you must provide alternative accommodation.

Similarly, if you rent the property unfurnished, you may not need to take out contents insurance, unless of course you want to protect inclusive furnishings like carpets or light fittings.

In this instance, it might also be worth considering the value of such content. Is the carpet old and does it have any real value? If its been laid for years, it might not be worth the amount you would pay to get it insured, so maybe contents insurance would not be required.

Make sure you ask yourself these questions before investing in landlord insurance, as it could save you money in the future.

Maximise the security of the property

If a property is equipped with decent security measures, the risk associated with burglary will be a lot lower.

This means your premium is likely to be a lot cheaper. You could ensure the property is fitted with an alarm, as well as sturdy locks on doors and windows.

Not only could it reduce your premium, but it could prevent you dealing with the stress that would occur if a crime related incident caused damage to your property.

If you are a looking into property investment, it might be worth noting that neighbourhoods under the ‘neighbour watch’ scheme are likely to reduce your landlord insurance premium.

Again, this is because those neighbourhoods may carry less of a risk and a lower crime rate. This could be something to think about before you commit to buying a property.

Say no to pets

If pets reside at the property along with your tenant, there is a higher risk of damages to occur.

Pets might scratch your furniture or mistake your expensive rug for a toilet, and in the eyes of insurance providers, somewhere along the line carpets or furnishings are likely to be ruined. For these reasons, premiums will be high. It might be a good idea then, to consider refusing pets right from the beginning.

Not only will this save you money in the first instance, it will spare you the headache of wanting to change the terms of your tenancy later down the line, if allowing tenants to have a pet has resulted in damage to your property.

Choose your tenants wisely

It is always important to consider the type of tenant you wish to rent to, as certain factors may increase your premium.

Renting out to students for example, may increase your premium because of the lifestyle many insurance companies might assume they will lead.

They may be more likely to throw parties, and therefore property or content is more likely to be damaged. Here at Utility Saving Expert, we do not like to make assumptions, but unfortunately insurance providers do.

In an insurance providers eyes, renting to a working professional will carry much less risk, so this is something you might want to consider if you wish to keep the costs of your premium within budget.

In conclusion, all the above factors are important points you should consider if you want to find the cheapest landlord insurance possible.

Compare landlord insurance

You should now have all the necessary information you need to help you choose the right landlord insurance policy. Use Utility Saving Expert’s online comparison tool to help you find cheap landlord insurance.