What Is Landlord Insurance?

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Landlord insurance is a form of home insurance which covers those who let their properties out to others. With the country still gripped by a cost of living crisis, this has never been more important. Landlord insurance can help to cover you against unexpected expenses that you may come across in the course of carrying out your business.  

Why Do You Need Landlord Insurance?

This form of insurance is something of a catch-all term for a group of different policies, but some are more important than others. As a rule, you can’t even take out a buy-to-let mortgage without proof of buildings insurance, and most lenders will specify a minimum level of coverage they require in their terms and conditions.  

Types of Landlord Insurance

But while there are requirements that you will have to fulfil, there are also optional extras that you can take out which give you greater peace of mind. Unexpected costs can appear out of the blue, and these other, more specialised forms of insurance can cover you for those. 

Landlord Buildings Insurance

Landlord buildings insurance is the most basic form of insurance that you’ll need. It covers the cost of repairing or rebuilding your property if the structure is damaged or destroyed. You are not legally required to take out buildings insurance, but it is strongly recommended that you do. 

If the property is one of a block of flats, buildings insurance will usually be part of a shared block policy, which you'll pay for as part of your service charge. But otherwise, you’ll need it. You’ll also need to check the specifics of what your insurance covers and what it doesn’t cover, as some policies may have specific exclusions that you may wish to get covered separately. 

Landlord Contents Insurance

Contents insurance can either be taken out as a standalone policy or as an add-on to buildings insurance. The level of contents insurance you'll need will depend on whether you're letting a furnished or unfurnished property.

Landlord contents insurance policies only pay out on items that you've provided in the property. Anything that belongs to your tenants, from everyday belongings to furniture, won't be covered, so it is advised that tenants should take out their own policy as well.

Property Portfolio Insurance

Buildings insurance is usually covered on a property-by-property basis, but if you own more than one it is possible to get cover which brings all of your properties under one umbrella. Portfolio policies are available to landlords who own several rented homes and want to insure them all at the same time.

Liability Insurance

Public liability insurance is an insurance cover that protects you from potential compensation claims related to your rental property, for example, if someone injures themselves or other property is damaged as a result of your property. Legal claims against you could be expensive, so your landlord liability insurance would step in to pay any related compensation, expenses and legal fees, up to the limit of your policy. Residential landlords have no legal requirement to take out landlord liability insurance, but it can be beneficial when letting a property. You have a legal responsibility to provide a safe property but, even with your best efforts, accidents can happen.

Loss of Rent Insurance (Rent Guarantee Insurance)

Times are hard for a lot of people, and the cost of living crisis is still hitting hard. It is also possible that there will be times when your property is unusable due to circumstances beyond your control. This is where rent insurance and rent guarantee insurance step in. 

If your property is rendered uninhabitable, loss of rent insurance will cover you as part of the standard buildings policy. But rent guarantee insurance has to be purchased as an add-on. This protects you if your tenant stops paying their rent and may be important if you use rent payments to make buy-to-let mortgage payments. 

Legal Expenses Insurance

Landlord Legal Protection covers you for a range of circumstances and common disputes such as evictions, pursuing rent arrears and property disputes, contract disputes, hotel expenses and storage costs, as well as criminal matters such as criminal prosecution, identity fraud and tax disputes.

Home Emergency Cover

Landlord home emergency cover is offered as an optional extra on most landlord insurance policies. It could help recoup the cost of out-of-hours callouts and repairs resulting from emergencies.

A home emergency is considered to be any event that makes your property unsafe or unfit to live in, puts your tenants in danger, or compromises your home’s security. Considering the cost of out-of-hours callouts, it's certainly worth thinking about. 

What Does Landlord Insurance Cover?

Landlord Buildings Insurance

Malicious damage caused by theft, vandalism, damage caused by weather or natural disasters, subsidence damage, damage caused by fire or smoke, flooding damage, caused naturally or through burst pipes. 

Landlord Contents Insurance

Theft of items from your rental property that you supply, damage to furniture caused by fire or water, damage to electricals and appliances, damage to clothing, footwear and linen.

Liability Insurance

Coverage if a tenant or visitor to your rental property is injured or their belongings are damaged while they are there. Injuries caused by a trip or fall caused by loose carpet or flooring, and damage to a visitor or tenant’s vehicle caused by a falling roof tile. Liability insurance can help to cover your costs should you be held responsible and someone makes a claim against you.

Loss of Rent Insurance (Rent Guarantee Insurance)

Coverage for a loss of income if your tenant falls into rent arrears or if you’re unable to rent the property out because of damage caused by flooding or fire. Insurers may also offer accommodation cover, which covers the cost of alternative accommodation for your tenants if they’re no longer able to safely live in your property.

Legal Expenses Insurance

Legal expenses insurance can cover your costs should you end up in a legal dispute with your tenant.

Home Emergency Cover

Plumbing or heating emergencies (but not always boiler cover), roofing problems and damage that causes a leak, damage to doors or windows that jeopardises the property’s security, blocked drains or sewers, lost keys, pest infestation, overnight accommodation costs should the property be unsafe.

Can I Get Landlord Insurance for Multiple Properties?

Landlords and property investors who own multiple properties can require insurance that’s suitable for a variety of needs. Multiple property insurance can provide one policy for all properties. Having multiple properties covered under one policy can help policyholders to stay on top of renewals and avoid accidental lapses. 

How Much Does Landlord Insurance Cost?

As we’ve already seen, the amount that you’ll pay in terms of landlord insurance will largely be determined by the range of your coverage. Factors that will influence the cost of your premiums will include the cost of cover can vary depending on your location, the age and construction of the building, and the likely cost of rebuilding it (also known as the ‘Building Declared Value’). 

Premiums can also be affected by your tenants, for instance, whether you let to students or professionals, your claims record, and what level of excess you are willing to pay. If you request rent guarantee insurance, the cost of your premium will be determined by the amount that you’re charging in rent in the first place. 

Prices have risen over the last couple of years, driven by a multitude of different factors. Inflation has risen, materials and labour prices have gone up, the market has shrunk and extreme weather conditions have raised risk levels for insurers. But that doesn’t mean that there isn’t good value out there if you’re prepared to do the leg work. The average price of insurance for a no-frills rebuild of a property was around £170-£200, but that will be likely to rise throughout the rest of 2024. 

How to Choose the Right Landlord Insurance Policy

There are certain things that you’ll need to do to ensure that you end up with the right coverage for you:  

Work out what cover you need

The main sums insured you need to calculate are your buildings, contents and property owners' liability:

Buildings

You should give your insurer the rebuild value of your property, rather than the market value or the price you paid for it. You can use the Association of British Insurers Rebuild Calculator to help you work this out.

Contents

You should give your insurer a total value of the replacement cost of your contents at your rental property. Create an inventory by going to each room, and noting everything you would need to replace in the event of a claim.

Property owners' liability

 You can usually choose a limit of £1 million, £2 million or £5 million. While a lower limit should be sufficient, you may need to choose a higher cover if you own several properties.

If you do not give the correct sums to your insurer, you may not be able to recover the full cost of any claims.

Choose the right loss of rent cover

This covers the loss of your rental income if your tenants have to move out because of damage to your property. It is important to get the right cover to protect loss of rental income, especially if you rely on your rent to pay your mortgage. Your insurer will ask you to specify:

Monthly rental income

Some insurers ask for the monthly figure you earn each month, others base payouts on a percentage of the rebuild value of your property.

Indemnity period

This is the time you need to claim for while your property is being repaired. You can usually choose between 12, 24 and 36 months. Think about how long it would take to rebuild your property and find new tenants.

Loss of rent cover is not the same as rent guarantee protection, which covers you if your tenants fail to pay.

Decide what optional or specialist cover you need

You can tailor most landlord insurance policies to include extra cover you may need, including accidental damage, malicious damage by tenants, pet damage, rent guarantee, or home emergency. 

It may be that you need more specialist insurance. Houses of Multiple Occupation, for example, may need to be covered under a separate type of policy, while those with a portfolio should specify the exact details of all the properties they want covered. Make sure that you get quotes from more than one company so that you can compare, and always keep an eye out for any promotional offers that may be available. 

Like many types of insurance, landlord insurance looks simple on the surface but contains hidden complexities the deeper you dive. But this can be advantageous to you. The growth of different types of policy means that you can now get cover that simply didn’t exist, which means peace of mind for you. It’s time to review your insurance needs and check whether you have coverage that matches your specific circumstances.