Landlord insurance is designed to protect you as a property owner against financial losses in relation to renting out your property.
You are not required to have insurance for a rental property under the law. However, a mortgage provider may have a condition that you have landlord insurance for a rental property.
In any case, your property has a large value and it is sensible to protect it as best you can.
Why take out landlord insurance?
Loss of rent
You could lose rent for many reasons. The most obvious is that the tenant fails to pay it for whatever reason.
Cash flow is important for many landlords (particularly if the property is buy to let), and not receiving the rent may leave you in a difficult situation to pay the mortgage or other expenses.
Another reason why you might not receive rent is in a situation where the property becomes uninhabitable (such as after a fire). Although the fire damages would be covered by building insurance, the loss of rent might not be covered by the same policy.
You might also need to cover the tenant’s alternative accommodation until the property is ready to live back in.
Accidental and malicious damage
Although you might vet your tenant before he or she moves in, you can’t guarantee how he or she treats your property once in.
Intentional damage is a concern for many landlords. There are stories about tenants reducing the property almost to rubble (one story we know is of a tenant who took up the floorboards to burn to keep the house warm because he didn’t want to pay for heating costs).
Insurance companies have various definitions of “malicious damage”. Some cover the damage caused by someone other than the tenant who was not legally allowed to occupy the property. Others cover damage covered by the tenant.
There may also be accidental damage, such a window breaking.
Faults in your property
By law, you are required to provide a safe property that is free of hazards. You are also required to ensure that gas and electrical supplies are installed properly.
Accidents happen regardless of how careful you are. If it turns out that the problem that caused the accident was due to your negligence or avoidance of repairing something, then you could be required to compensate for that accident.
Types of landlord insurance
It is possible to take out policies that give varying degrees of cover, some of which combine insurance for the following:
Building and contents
Building and contents insurance for a landlord is similar as for any other property owner. It insures against structural damage to the property, for example, as a result of a flood or fire. It may also cover accidental breakage of windows.
However, some non-landlord specific policies do not cover the situation where the property owner does not live in the property himself or herself. If you are letting on an assured shorthold tenancy basis, you may need a landlord-specific policy.
Usually a tenancy agreement states that the tenant should insure his or her own possessions. Contents insurance is therefore limited to those things that the landlord provides, such as carpets, white goods or furniture, which are likely to have a lesser value than tenants’ possessions such as computers and bicycles.
Public liability insurance
This type of insurance covers legal costs and damages resulting from an accident that happens to someone else while on your property.
To be liable, the fault must lie with you having not maintained or secured the property. For example, it is unlikely you would be at fault if someone trips over a bicycle left in a corridor (especially if the tenancy agreement states that bikes shouldn’t be left in corridors), but you may be at fault if a tile falls off the roof onto the tenant’s friend’s car because you haven’t maintained the roof.
Landlord emergency insurance
Emergency insurance tends to cover emergency repairs to property which otherwise would have an adverse effect on the health or safety of the tenant if they were not resolved completely.
For example, although a boiler breakdown might be covered by the contents insurance (or even a boiler guarantee), it might be necessary to have it fixed the same day. Emergency insurance may pay for this.
Rent guarantee insurance
This type of insurance ensures that you are compensated if the tenant stops paying you rent. The insurance company may attempt to recover the rent money from the tenant.
Once you’ve found suitable policies
Once you have found what seems to be an appropriate policy, you should read in detail the policy documents that are given to you by the insurer. You need to be satisfied about exactly what your policy covers.
When you insured satisfactorily, you will feel much more confident renting out your property to the tenant. Remember to inform the tenant of your policies and make sure that he or she has his or her own policy for personal possessions.