Do I need landlord insurance?
There is no legal requirement for you to have landlord insurance if you are letting your property to tenants – and it is not generally a condition when applying for a licence for let property when one is needed from your local council.
If you are buying the property with the help of a buy to let mortgage, however, your lender is almost certain to insist on sufficient landlord insurance remaining in place at all times – including any voids in your letting the property.
Quite apart from that obligation, of course, landlord insurance provides valuable protection for the investment you have made and the buy to let business you are running.
What if I already have property insurance?
Whether you own residential or commercial premises, you are likely to have arranged some form of property insurance when you moved in.
If you look more closely at any such policy, however, you may find that it specifically excludes cover whilst the property is let to tenants or leaseholders.
The protection you need, therefore, is purpose designed landlord insurance.
Are all types of tenant covered?
Although a report by the BBC on the 26th of February 2018 suggested that they may be breaking laws on non-discrimination and equality, the fact remains that many landlords – and their insurers – exclude tenants from certain groups of people, such as the unemployed or those on welfare benefits.
A briefing paper to Parliament on the 29th of March 2018 confirmed that the practice is widespread, but that it is difficult to prove a case of direct discrimination.
To maximise the rental income potential by embracing as broad – and as lucrative – a market as possible, therefore, you might want to make sure that your landlord insurance provider extends cover to all classes of tenants, including the unemployed and those on social security benefits.
What cover does landlord insurance provide?
Although the details of any policy are likely to vary from one insurer to another, landlord insurance typically covers the following principal headings:
- at the heart of your landlord insurance is likely to be the building insurance to protect the structure and fabric of the property against such potentially severe risks as fire, explosions, earthquakes, flooding, storm damage, impacts, vandalism and theft;
- some landlord insurance policies may also extend to malicious damage caused by your tenants or their visitors – and you might want to check that this cover is in place if you are letting to tenants you consider to pose such a threat;
- protection against malicious damage may also extend to any contents you own in the let property;
- broader contents insurance may cover as much or as little as you choose – it might be limited, for example, to the fittings and furniture with which you have furnished common areas such as hallways and staircases;
Landlord liability insurance
- a significant financial risk is posed by your role as a landlord and the liabilities which that may entail;
- if a tenant, one of their visitors, a neighbour or even a member of the public is injured or has their property damaged, for instance, you may be held liable and sued for compensation;
- indemnity against claims of at least £1 million is typically incorporated into your landlord insurance policy (with some providers this can be as much as £5 million);
Compensation for loss of rental income
- landlord insurance recognises that you are letting your property as a business and that if an insured event leaves it temporarily uninhabitable, you stand to lose the rental income on which your business depends;
- typically, therefore, landlord insurance provides for an element of compensation for such loss of rental income.
In these ways, landlord insurance offers protection against a wide range of risks associated both with the physical integrity of your property and the business you are running.