If you are a full-time landlord with a buy to let business to run or an “accidental” landlord and have come into property which you decide it is best to let, you need landlord insurance.
This brief guide explains why that is and what the insurance covers.
The principle of landlord insurance
You may be familiar with home insurance, in all its various guises, but the moment you let the property to tenants, that standard form of cover is inadequate and needs to be replaced by specialist landlord insurance. If the property is let and you have only standard home insurance, rather than landlord insurance, any claim for loss or damage you need to make is likely to be rejected.
The need for use-specific insurance is because the property is in use as a buy to let business, rather than your own home, and when it is let to tenants the risks take on a different order to an owner-occupied home.
Insuring the building
Nevertheless, landlord insurance shares with any other type of property insurance the importance of protecting the structure and fabric of the building – against serious risks such as fire, flooding, storm damage, impacts (from falling objects and vehicle), vandalism and theft.
Some policies may even extend to cover for malicious damage caused by your tenants to the building or its contents.
Typically, the total building sum insured takes into account the risk of a total loss, requiring the complete reconstruction of the property – so your valuation of this cost needs to be kept up to date, possibly with reference to the Royal Institute of Chartered Surveyors’ (RICS) House Rebuilding Cost Index.
Any contents which you own in the let property may also be covered by your landlord insurance – contents owned by your tenants are their responsibility.
Landlord liability insurance
Landlords may also encounter further liabilities than owner-occupiers – in respect of their duty of care to ensure the health and safety of tenants and their visitors. If a tenant, one of their visitors, a neighbour or a member of the public is injured or has their property damaged through some connection with your let property, you may be sued for compensation as the landlord of the premises.
Landlord liability insurance provides indemnity against such claims – which may be substantial, especially if injuries have occurred. For that reason, landlord liability insurance typically offers at least £1 million of indemnity, but some policies may increase this to up to £5 million.
If you are a landlord employing others to help run your business, the law insists that you have at least £5 million of employers’ liability insurance to meet claims from any employee who is injured or contracts a longer-term medical condition because of their work for you.
Loss of rental income
Because your buy to let business relies on an income from the rents you receive, landlord insurance may also provide compensation (up to prescribed limits) for rental income that may be lost if the premises become temporarily uninhabitable following an insured event.