Types of landlord insurance: which do you need?
While buying rental properties can be a great investment, those who are new to being a landlord don’t always realise that they may need specialist types of landlord insurance to cover the properties they rent out. This is often also a requirement for their mortgage providers. Luckily, there are many insurance options available to landlords to protect their let properties, and their income.
Is landlord insurance compulsory?
Is landlord insurance necessary? If you have a mortgage on the property you’re renting out it’s likely that your lender will require you to take out a buildings insurance policy. Depending on the type of landlord insurance you choose, buildings cover will usually be a part of your policy. And considering the issues that can potentially arise while renting properties, it may give you peace of mind to take out a more comprehensive type of landlord insurance policy.
In the long run, it may prevent you from paying out large amounts in the case of accidental damage occuring or your tenants being unable to pay rent.
Use our landlord insurance guide below to find out more about the types of landlord insurance policies available to you and whether it applies to your circumstances before deciding on a level of cover.
Buildings insurance covers a number of risks, including full replacement or repair costs for your property following an insured event, as well as the cost of clearing the site in case of complete destruction.
Buildings insurance for landlords will generally cover your property against a number of different risks including:
- Fire or smoke
- Theft, vandalism or malicious damage
- Oil or water leakage
- Lightning, storm (excludes gates and fences) or earthquake
- Subsidence, heave or landslip
- Burst pipes
- Impact caused by vehicles, falling trees, animals, aircraft, aerials and masts
- Civil commotion (usually excluding properties in Northern Ireland)
- Property owners’ liability
When you get a quote, you’ll need to know the rebuild value of the property. Find out how to calculate your rebuild value for buildings insurance.
Do I need landlord insurance and buildings insurance?
Landlord insurance is essentially an all-encompassing term for the different insurances available to you as a landlord, which includes buildings and contents insurance for let properties. Speak to your insurance provider if you’re not sure what’s covered.
If you have a mortgage on your rental property, it is normally a requirement set by your bank or mortgage provider that you have buildings insurance in place. They’ll sometimes also ask to be noted as an ‘interested party’ on your policy so if you’re unsure, please check this with your mortgage or loan provider.
If you’re letting to tenants with pets, you may also want to consider landlord insurance that includes cover for pet damage.
Landlord contents insurance
Depending on your insurer, you can usually add contents cover to your landlord buildings insurance to protect your belongings against risks such as fire, theft and flood. You can even save up to 20% when you take out combined landlord buildings and contents insurance with Endsleigh.
Contents cover includes furniture, household utensils, kitchen electrical equipment, curtains and carpets. You can also extend the level of cover so that accidental damage is included.
Do I need contents insurance as a landlord?
Contents cover is an optional extra, so you will only need to arrange landlord contents cover for the items that you own. This could be furniture or white goods that you’ve left for your tenants to use in the property.
The decision of whether to furnish your property is just one of the many decisions that landlords face when letting properties for the first time, and it will ultimately come down to comparing the up-front costs against the potential for a higher monthly rental income. Read more about how to decide whether or not to furnish your rental property.
Does landlord insurance cover tenants contents?
Even if you’ve opted for a type of landlord insurance that includes contents insurance, this will not cover the belongings that your tenants have in your property. It is their responsibility to arrange cover for their own possessions, however you may want to keep in mind that if, for example, your tenants use their own white goods and cause damage to your furniture or property, you will need to have the right policy in place to cover for this kind of occurrence.
Property Portfolio insurance
Property portfolio insurance is for landlords who own five or more properties, and is a convenient and usually cost effective way of covering the buildings (and contents if required) on all of their let properties, all under one policy with one premium and one renewal date.
Not only does this make paperwork less taxing, but usually discounts will be applied the more properties that are added to the policy, making it more cost effective. You can also insure blocks of flats on these policies.
Even if your tenants have passed the initial rent affordability checks, there may still come a time where your tenant has difficulty paying their rent. This can happen for a number of reasons, and it’s helpful to be prepared should your tenant fall into arrears – especially if you’re reliant on the rental income to pay your mortgage.
Rent guarantee and legal expenses insurance can protect you from being out of pocket in the event that your tenant doesn’t pay, providing support to recover any lost rent as well as covering the cost of legal disputes in relation to repossession and eviction. You will also receive interim rental payments whilst your insurer helps to recover the lost rent, although there is usually a one month rental excess. If you’re not sure what’s covered as part of this type of landlord insurance policy, please read your policy booklet or speak to your insurer for more information.
Home emergency cover
You can add home emergency cover to your landlord buildings and contents policy to protect your property, and your tenants, against the loss of essential services. This cover usually protects you 24 hours a day for emergencies.
Legal expenses cover
You can add legal expenses cover to your landlord buildings and contents policy to provide you with legal protection. Sometimes this is even included as standard, so it’s worth checking your policy wording.
What type of landlord insurance do I need?
If you have a mortgage on your rental property, it may be a requirement of your bank that there is buildings insurance cover in place so it’s important to check this with your mortgage provider.
Outside of this, it’s completely up to you what types of landlord insurance you choose for your rental property, and you should consider all scenarios when deciding what covers you need in place.
What would happen, for example, if your tenants were unable to pay their rent? Would you still be able to make your mortgage payments? Do you know how to evict a tenant should you need to? If not, then you may want to consider rent guarantee and legal expenses insurance.
How close do you live to your rental property? Would you be able to get to your tenants quickly in the event of an emergency? Having home emergency cover in place for your property and providing your tenants with the policy information could ultimately save you hassle should something go wrong at the property, such as a boiler breakdown or a blocked drain.