Insurance

What Home Insurance Do I Need If I Rent Out To Tenants?

Allison S Robinson | 3 December 2021 | 3 years ago

What home insurance do I need if I rent out to tenants?

When buying-to-let or renting out a house, it’s important to understand the options available to landlords for home insurance, as this differs from regular homeowner insurance.

If you’re a new or existing landlord that wants to make sure that you and your property are fully insured to prevent unexpected bills when things go wrong, you may be wondering what home insurance you need if you rent out to tenants.

Although not a legal requirement, landlords are strongly advised, and it is sometimes a term of a lender’s mortgage agreement, to take out landlord insurance with adequate cover to protect the owner, the property, and its tenants, should things ever go wrong.

What does landlord insurance cover?

Landlord insurance is a specialist type of homeowner policy that is designed to protect rental property owners from financial loss resulting from the specific risks of owning a rental property. It can be tailored to cover a wide range of things including, accidental damage, building’s cover, contents cover, liability cover, rental income cover, professional liability and legal protection.

Standard home insurance policies aren’t designed to cover property rentals so, as stipulated in most mortgage agreements, property owners looking to rent out their home should ensure they have a specialist landlords insurance policy in place to prevent insurance policies being invalidated should there ever be a need to make a claim.

Do I need landlord insurance?

If you are mortgage-free, or in the highly unlikely event that your mortgage provider doesn’t insist on landlord insurance being taken out, the decision on whether or not to take out insurance on a property that you rent out to tenants is up to you. If your lender requires landlord insurance as part of their terms, or if you want to ensure that you’re fully protected against the financial risks of owning a rental property, then you will probably want to find a suitable policy.

Read on to find out more about landlord insurance, what it covers and how it differs from regular homeowner insurance so that you can make the right, informed decision for you and your property. 

What Is landlord insurance?

Landlords’ insurance is an insurance policy that covers a property owner from suffering the financial losses associated with the risks of renting out property. The policy usually covers the building as standard, with the option of insuring any contents that belong to the landlord, plus additional extras such as loss of rental income or accidental damage cover.

What is the difference between landlord insurance & regular home insurance?

Insurance cover is all about protecting policyholders from risks associated with their activities. When it comes to owning property, homeowners that rent out their property to others face a different set of risks to regular homeowners that live in their property.

For example, landlords may supply the property with some furnishings that could be damaged by tenants, a tenant could be injured in the house by something that should have been taken care of under regular landlord obligations, keys get lost and locks need replacing more often to maintain security, and landlords can suffer from loss of rental income should tenants default on their payments to name just a few. This is all on top of the usual threats that any building faces from fire, theft, flood and storm damage.

Due to the specific risks associated with renting a property, landlord insurance is often stipulated as a mandatory requirement by mortgage lenders on buy to let homes and regular homeowner insurance wouldn’t be accepted or be valid for anyone that is renting out their property.

What type of property needs landlord insurance?

UK street

From a simple one up, one down to an eight-bedroom manor house with extensive grounds, if you own any kind of property that is rented out to tenants, then you should consider taking out landlord insurance.

Any kind of property can be covered by a valid landlord insurance policy, regardless of material, structure, size or location including;

  • Bungalows,
  • Maisonettes,
  • Semi-detached houses,
  • Detached houses,
  • Flats in dedicated flat blocks or converted houses or buildings
  • Terrace houses

What should the policy cover?

As with any insurance policy, not all landlord insurance options are equal. The level of cover that you take out will depend on your attitude to risk and the budget you have available but should at the very least include:

  • Buy-to-Let buildings cover
  • Property owners’ liability insurance
  • Tenant default/loss of rent
  • Landlords contents Insurance
  • Accidental damage insurance
  • Landlords legal protection
Most basic landlord insurance policies will cover the building itself as standard. When shopping for landlord insurance you should make a list of the things that you need to be covered for. Then check that this is included in the small print of any new policy that you are considering.

You should also remember that if you employ anyone to help you to manage the rental property, you are legally required to hold employers liability insurance too.

Taking the time to consider cover for crucial elements like building contents, windows, doors and locks, property owners liability insurance, legal costs, loss of rent, and alternative accommodation costs at the point of buying, could save you thousands in the long run.

Buying insurance

Although unlikely to be anyone’s favourite job, you should always take the time to compare insurance providers and the level of cover that they provide to get the right level of protection for you and your rental property. It’s not always the best idea to go with the cheapest quote you find, and should always pay attention to the small print.

If you ever need to make an insurance claim to recoup the cost of damage or loss suffered relating to the rental property, then finding out you’re under-insured, or that something you assumed was covered isn’t after all, can be a very costly mistake to make.

To prevent this from happening, you should compare providers and pay attention to the details of the policy, what is covered, and any excess payments that you would be liable to pay.

Some insurance providers will package all of the individual policy elements together to create a single, comprehensive landlords policy, but others will sell each element separately. Never assume something is covered, unless you have read it in black and white within the policy documents.

Pay specific attention to excess fees, administration fees and the total value of insured assets. Overlooking these key elements may leave you facing large, unexpected excess payments or even leave you underinsured, which could in the worst-case scenario prevent the provider from paying out in the event of a claim, or invalidate your policy entirely.

What does it all mean?

Hands shielding 2D house

Whether your insurance provider offers lots of protection as standard, or you need to add on various elements to a basic cover plan, it’s worth keeping an eye out for the following types of landlord insurance cover.

  • Property owners’ liability insurance: Protects landlords against compensation claims when the property causes injury or damage to tenants or visitors.
  • Tenant default/loss of rent: Provides cover if active tenants with a tenancy agreement in place default on their rental payments. This policy won’t cover you for lost income when the property is vacant.
  • Landlords contents insurance: Covers damage or theft of any fixtures, fittings or furnishings that you provide with the house. This could include carpets, white goods, curtains etc. and you should always check the wording of what is and isn’t covered as not all policies are the same.
  • Accidental damage insurance: Even the best tenants can cause accidental damage. Adding this to your policy provides peace of mind to the landlord and tenant that nobody will be out of pocket if accidents occur.
  • Buy-to-Let buildings cover: Or landlord building insurance covers you from damage to the property itself resulting from fire, lightning, water, explosion or malicious damage. Ensure you have sufficient cover to meet the cost of repairing or rebuilding the property after damage or destruction.
  • Employers liability: If you pay anybody to assist you in managing the property, you are legally required to have employers liability insurance to protect you from claims from accidents happening in the property.
  • Landlords legal protection: if faced with legal action or claims of negligence or injury, legal bills can quickly add up. Landlords legal protection can cover some or all of your legal fees.

Related questions

How much does landlord insurance cost?

There is no single answer to this question as every home and every insurance policy is unique and tailored to the needs of the property owner and the risks they may face as a landlord.

To get an idea of how much your landlord insurance premium could cost, visit insurance comparison sites and select the level of cover that you need. This will ensure you’re only paying for what you need but you should remember to factor in excess payments when considering your insurance budgets.

Excess is the amount you will be required to pay in the event of an insurance claim being made and there may be varying excess due on each element of your insurance cover. For example, if your rental property suffers fire damage to the value of £10,000 but your excess payment is £3,000, then the payout would only be for up to £7,000 because you must cover the first £3,000 of the claim.

Do I need contents insurance?

If you are letting the property fully or partially furnished then you may want to consider taking out contents insurance even if you rent out the property to tenants.

Some landlord insurance policies will include a level of contents protection as standard whereas others will require you to specifically add this on at the point of purchase as an optional extra. You should therefore know what you’re looking to insure and make a point of checking if any new policy you are considering taking out covers those specific points.

Even in a part-furnished house, damage to things like curtains, carpets, and kitchen appliances can be costly to repair or replace when damaged, so contents insurance could provide peace of mind that you would be covered by insurance should anything happen to them during the tenancy.

Do I need landlord insurance if I have buildings insurance?

If you currently live in your home but are considering renting it out, you should always make your current insurance provider aware so that they can confirm if you have adequate insurance cover, and that your policy won’t be invalidated due to the changes made.

Due to the different levels of risk associated with living in your own home and renting it out to tenants, you will always need to check directly with your current buildings insurance provider to see if they can continue to provide the cover you need.

In most cases, you will need to take out a specific landlord insurance policy but you may be able to extend your current homeowner policy to add in the additional cover you need, especially if they are required by your mortgage lender.

Summary

If you’re a landlord that is wondering what home insurance do I need if I rent out to tenants, then we hope this article has given you a simple overview of your options and the key things to consider.

To recap, although home insurance isn’t a legal requirement of letting out your property, taking out proper cover against accidental damage, defaulting tenants, liability, contents and building structure is highly recommended to protect you from the expensive loss or damage to a property that can occur as a result of renting out a home.

Ultimately, the decision of whether to insure a home when renting to tenants is up to the building owner. If opting out of purchasing a comprehensive landlord insurance policy, homeowners need to be aware that they could be in breach of the terms of their mortgage agreement and face costly repair claims, legal fees or income free periods should things go wrong when renting out the property.

To make the right decision for you and your property, you should weigh up the risks and likely cost of putting right any damage that could occur, against the cost of an insurance premium that would cover you in the event the incident happens.

Topic

Insurance

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