Landlords Insurance (for buy to let landlords)

As landlords effectively use their property as an extra source of income, seeking out insurance specifically designed for landlords in order to protect their investment is essential.

Remember, a normal home insurance policy is not valid when you are taking an income from the property – only a residential landlord insurance policy can give you the required security.

With the correct landlords insurance policy in place you can relax, safe in the knowledge that you are protected against any financial consequences that may occur through damage to your property, leaving you to concentrate fully on running your property.

If the property you are letting was your home, it’s essential you inform your current insurer you are doing so or your policy could be null and void. If this is the case your insurer may require that tenants meet specific criteria and could offer you the same cover at no extra cost.

There is a range of insurance options available under landlords insurance, some of which are described in more depth below. These include:

• Buildings cover
• Contents cover
• Buy-to-let insurance/specialist landlords insurance (owners’ liability, loss of rent, etc)
• Employers liability cover
• Home emergency cover
• Accidental damage cover
• Landlords rent guarantee cover

Landlord Buildings Insurance

Buildings insurance is required if a property is bought with a mortgage. This insurance type covers the structure of any buildings included in it and any items that would normally be left behind (once residents have moved out) against damage caused by hazards such as fire, burst pipes, lightning and flooding.

The rebuild cost is used as the sum insured (the cost of rebuilding the property if it is completely destroyed) instead of the property’s market value. This sum is included on the original valuation report and could be above or below the market value, depending on the date the property was built.

However, some insurance providers will offer cover for an unlimited amount, meaning there is no need to inform them of the rebuild cost.

When it comes to buy-to-let properties there can be some possible limitations of regular buildings insurance involved.

For example, the property may not be covered if it is empty for more than 30 days at a time and the cover for your liability as the owner for any injuries that might occur within the property may not be sufficient. In addition, it is highly likely that the insurance will not cover you against any injuries sustained by employees (hired by you) in the property.

Landlord Contents Insurance

Having contents cover as a landlord is highly recommended as the money received from your tenants’ deposits may not be sufficient to pay for any damage that occurs.

If your property is unfurnished then taking out full contents cover may not be needed. Instead, you could save money by taking out a policy for damage to items such as floor coverings, curtains and any electrical appliances you have supplied, which could range from £5,000 to £15,000 worth of cover.

Remember, the policy will not cover your tenants’ belongings so advise them to take out their own insurance for their contents.

For a furnished property, a full contents insurance policy should be taken out. In some cases a full policy may need to provide more than double the amount of cover you would need for an unfurnished property.

Be aware that the excess on a standard home insurance policy to cover a let property is likely to be higher. Also, the 30-day limit is likely to apply to periods when the property is unused and you may not be given the option of paying a higher premium, to be covered for accidental damage, as you would as an owner-occupier.

Buy-to-Let Insurance

Specialist landlord’s or buy-to-let insurance policies can help landlords receive a better level of cover compared to what is generally offered by regular home insurance. These policies can also lower the risk of being unable to claim in the event of any damage to the property.

According to the Council of Mortgage Lenders the number of buy-to-let mortgages substantially increased by 68% between 2003 and 2005. This considerable rise has led to an increase in the number of specialist landlord’s insurance policies available, with insurers aiming to capitalise on the growing market.

These policies include a range of special features such as extra cover for loss of rent should the property become empty for an extended period due to damage and cover for owners’ liability. The latter usually comes as standard with a landlord insurance policy and would cover you in situations such as where the tenant holds you liable for an injury, which was caused within your property.

There are also different levels of contents cover for furnished or unfurnished properties and unoccupied periods of up to 120 days, although there may be restrictions on letting the property to students, DSS tenants, or asylum seekers.

Regular insurers such as Endsleigh and Norwich Union are now offering landlord’s insurance, but it may be worth searching for deals through smaller specialist insurers and specialist buy-to-let mortgage brokers such as Landlord Mortgages. They may be able to get you a better deal on a more suitable policy, so shop around carefully.

Extra Options

There are other options that may be available from your insurance provider that help pay for items such as accidental damage cover, employer’s liability cover and legal protection - to insure you against any legal costs you incur through letting the property (e.g. debt recovery or contract disputes).

This can be particularly valuable when you take into account the high cost of legal services.

In addition, home emergency cover can often be included to cover you from contractors’ call out charges, labour, parts and materials (up to a particular amount) to more common problems such as internal and external plumbing and drains, electrics and central heating, vandalism, break-ins and even lost keys.

Home emergency cover is generally recommended for landlords who are managing their own property and do not live nearby.

Accidental Damage Cover

Accidental damage cover for buildings and/or contents provides a landlord with cover against any accidental damage caused to the building or contents by the tenant. An example of accidental damage to a building would be a tenant banging a nail into the wall for a picture and accidentally hitting and damaging a pipe.

Although some insurers will include accidental damage as free additional cover, most will charge extra for cover and many will not offer such cover at all.