Landlord insurance

Landlords insurance: what does it cover and is it worth it?

Buy-to-let property owners and landlords of residential rentals are inevitably exposed to a certain level of risk, and landlords insurance can offer peace of mind.

Of all the things to consider as a buy-to-let landlord to maximise your investment, landlords insurance is a key way of protecting your assets. It isn’t compulsory for landlords to take out specialist insurance, and it’s normally more expensive than standard building and contents cover, which can put some people off – but it’s something all landlords should consider.

Why landlords insurance is important

For most people, their property (or properties) are their biggest and most expensive asset, and for landlords it is an investment that provides some if not all of their income. Renting out a property comes with its own set of risks, whether related to the tenant or external events, and homeowner insurance doesn’t cater for these specific eventualities. What’s more, many insurers simply won’t cover properties that are rented out with a standard, non-landlord policy, leaving the owner fully exposed to risk.

While some may baulk at the added expense of comprehensive cover, when calculating how much could be lost if the tenant stops paying rent or if there’s an expensive and unexpected repair to be done on the property, most will find that it is actually worth the cost.

What can you cover?

Buildings and contents are routinely covered by any property insurance, although sometimes separate buildings insurance will not be necessary on a rental property if it is owned on a leasehold basis and the building is covered through a separate policy with the freeholder, so this is worth checking. Contents cover is only really applicable where the property is rented out furnished or part-furnished, as the tenant must arrange cover for their own possessions if they want to. A number of other options can also be covered with landlords insurance, including:

  • Loss of rental income
  • Accidental or malicious damage or theft
  • Legal expenses
  • Property owners’ liability
  • Eviction costs
  • Cover to rehouse tenants if the property isn’t habitable

How much will I need to pay?

The cost depends on the level of cover you decide to take out, and this depends on your unique situation as a landlord. A good insurance company or a broker will be able to help you decide what to go for.

Some of it might depend on your tenants – most insurers will want to know about them, particularly their employment status as this will help them decide how likely they are to default on payments.

As with any insurance policy, there are ways to make your premiums cheaper. Accurately estimating the rebuild cost of the property can avoid you paying too much, as well as paying a higher voluntary excess in the event of a claim. If the property is unfurnished, there’s no need to take out contents insurance as the tenants will cover their own belongings if they wish to.

While insurers can look favourably on homes with extra security (alarms, extra locks, etc), when it comes to rental property this is slightly more complicated. Including this in a landlords insurance policy would rely on the tenants taking responsibility for the security measures, such as ensuring the alarm is set, and if this wasn’t done the policy could be void.

The key takeaway is that renting out property will never be without its risks, so it’s important to get the right cover to give you peace of mind if something goes wrong.

Our team at BuyAssociation can put you in touch with a buy-to-let landlord insurance specialist, who can help you get the right cover. To find out more, send an enquiry online or call us on +44 (0) 333 123 0320 (UK) or +852 2554 5509 (HK).

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