There are a lot of costs to consider when buying and managing an investment property, so why should you pay out even more by buying landlord insurance? There are several reasons why it’s worthwhile:
It protects you against risks typically faced by landlords. As a landlord, you’re exposed to a range of risks that don’t affect ordinary homeowners. The best landlord insurance provides the financial protection you need to look after your investment property.
It provides peace of mind. In some cases, the security deposit won’t be enough to cover you for tenant-related losses. Landlord insurance is designed to guarantee that you won’t be left out-of-pocket when something goes wrong with your property.
Cover is available for short-term rentals. Landlord insurance doesn’t just cover long-term tenancies; there are also policies available to cover short-term rental arrangements, such as renting out your property through websites like Airbnb.
Mortgage requirement. If you have a buy-to-let mortgage your lender might require you to have landlord insurance in order to qualify for the loan.
What does landlord insurance cover?
Landlord insurance offers a broad range of protection across three critical areas: loss of rental income, damage to the building and damage to contents.
Loss of rental income
Landlord insurance protects you against the loss of rental income due to the following events and circumstances:
Absconding tenant. This refers to a tenant moving out without giving proper notice, or if they move out at the end of the lease and leave rent unpaid.
Defaulting tenant. You’ll be covered if a tenant fails to pay their rent and is either issued with a termination notice, or has their lease terminated by court or tribunal order.
Public liability. If a tenant or visitor is injured on your property and claims against you.
Tenant failing to vacate. If you suffer loss of rent due to a tenant who refuses to pay rent and vacate your property following a court order, landlord insurance provides financial protection.
Death of a tenant. Covers you for loss of rent if your tenant should pass away.
Tenant hardship. If a court decides that, due to financial hardship, your tenant will be released from their lease obligations, your policy will cover you.
Unliveable property. This benefit ensures that you are covered for loss of rent if your property isn’t fit to be leased due to malicious damage to the building by a tenant, or damage to your contents caused by an insured event.
Unable to access property. Your policy can provide cover if a tenant is unable to access the property due to damage to other properties nearby.
Damage to building
If there is loss or damage to your building caused by tenants, their family members or guests they invite onto the property, landlord insurance will offset the cost of repair or replacement. Cover is included for the following:
Insured events. Just like a regular home insurance policy, landlord insurance provides cover against events such as fire, flood, storm and water damage. It includes demolition, removal of debris and rebuilding costs.
Accidental loss or damage. Your building is covered against sudden and unexpected loss or damage.
Intentional damage. If the building is wilfully damaged without your consent, your policy offers financial protection.
Malicious damage. This covers damage to the property that is motivated by malice.
Theft. You’re covered for loss suffered due to theft, as well as any damage to your building that occurs as a result of theft.
Pet damage. Many landlord insurance policies cover damage to the property caused by a domestic pet owned by the tenant and listed on the lease.
Scorching. If cigarettes, irons or pots and pans spoil the carpet or worktops in your property, you will be covered for the damage.
What’s classified as a building?
A building is defined as a property that you own at the insured address, which is used primarily for residential purposes. The definition of a building includes:
Fixtures and fittings, including built-in air conditioning units, plumbed-in dishwashers, cooktops, doors, walls and windows
Structural improvements, including paths, driveways, fencing, retaining walls and in-ground swimming pools
Awnings, pergolas, TV antennas, solar panels and letterboxes
Fixed floor coverings such as linoleum and tiles, but not carpets
Fixed light fittings
Underground services located on your property, including sewerage, plumbing and electrical services
Landlord insurance also provides protection for the contents you own, or for which you are legally responsible, in your investment property, including the following:
Accidental loss or damage. You’re covered for sudden or unexpected loss or damage to contents.
Intentional and malicious damage. Protection for damage caused by a tenant or by any unknown person.
Insured events. Incidents such as flood, storm and rainwater, fire, explosion, impact, escape of liquid, earthquake, lightning and glass breakage are all covered by this policy.
Theft. This benefit insures against theft or attempted theft by a tenant, members of the tenant’s family, the tenant’s invited guests or an unknown person.
What contents are covered?
The contents covered under a landlord insurance policy are those items owned by you at the property, or for which you are legally responsible. This includes:
Portable household items
Curtains and blinds
Carpets and rugs
Contents can also refer to temporary wall, floor and ceiling covers
What additional benefits are available?
As well as the items listed above, landlord insurance policies offer a range of additional benefits to suit a landlord’s needs. These include the following:
Legal expenses. If the insurer has accepted a claim for loss of rent, your policy can cover the legal expenses you incur when attempting to reduce your loss, or if you have to organise a legal defence.
Representation expenses. If your property manager represents you in court or at a tribunal hearing, your insurance covers their representation fee.
Legal liability cover. You’re covered for legal liability if you’re at fault when a tenant or another party dies or suffers a bodily injury at your property, or when someone else’s property is damaged.
Replacement of locks. If a tenant is evicted by court order and you need to change the locks, landlord insurance can cover this cost.
Removal of tenant’s possessions. If a tenancy has ended and you’ve made an insurance claim for loss of rent, your policy may cover the cost of removing the tenant’s possessions from the property.
How much does landlord insurance cost?
There is no blanket answer to the question of how much you can expect to pay for cover. The cost of landlord insurance is influenced by a number of factors, including the following:
The type of property you own. The size of the house will affect the cost of cover. For example, a four-bedroom house will typically cost more to insure than a two-bedroom apartment.
Where the property is located. This can affect the likelihood of you needing to make a claim. For example, your home may be found in an area prone to severe storm and rain damage, or you may live in a high-crime area where there is an increased risk of theft or burglary.
The site itself. Other unique factors about your property will also be taken into account. For example, if it’s located in a flood-prone area or surrounded by tall trees, your premiums could be higher.
The value of your building and contents. How much would it cost to rebuild your property and to replace all the contents that are the landlord’s responsibility? The higher this figure is, the higher your landlord insurance premiums will be.
How secure your property is. Does the property have any security features to deter thieves and burglars, such as a state-of-the-art alarm system? If so, this could lower your premiums.
The age and construction of your property. The insurer will consider how old your property is and the materials used in its construction when determining how likely it is to withstand damage.
Your claims history. If you’ve previously made multiple claims on your landlord insurance policy, you can expect an increase in the cost of cover in the future.
Find out how you can find the cheapest landlord insurance that’s right for you.
For an accurate guide to the cost of cover, compare landlord insurance quotes from multiple insurers.
Do I need landlord insurance for a leasehold property?
If your investment property is leasehold, it’s important to be aware of what situations are covered by your freeholder’s building insurance and what’s covered by your landlord insurance. Generally, buildings insurance will be managed via the freeholder, although the costs for the insurance may well come from the service charge that you pay as a leaseholder. However, you will need to have a landlord insurance policy when you let it out if you want to protect yourself against loss of rent, and damage to the building and your possessions.
Did you know?
If you own a property as a freehold, it means that you own the building and the land it stands on outright, in perpetuity. It is your name in the Land Registry as “freeholder”, owning the “title absolute”.
A leasehold can be considered a long-term lease from the owner of the land. In the UK this usually occurs with blocks of flats. The lease can be for as long as 999 year or as short as 40 years. Once elapsed, the lease must be extended at a price or the property is returned to the owner.
This means that when purchasing a leasehold property you must consider how long is left on the lease and how this may affect selling the property on when you’re ready.
What will the freeholder’s buildings insurance cover?
The building and any of its structural improvements
Fixtures which form part of the building
Fences and gates
Fixed swimming pools
Playing surfaces, such as tennis courts
Above-ground and underground services
Lawns, trees, plants and gardens
It also covers contents located in a common area, such as:
Furniture and furnishings
Blinds and curtains
Temporary wall, floor and ceiling coverings
However, the exact list of items and areas covered varies between insurers, so check the policy’s product disclosure statement (PDS) for full details of the cover provided.
What exclusions should I be aware of?
When you compare the best landlord insurance policies, make sure you take a close look at the list of general exclusions. These are situations and events which the insurer will not cover, such as:
Any intentional act committed by you, your family or anyone acting with your consent
Water entering the building through an opening made to renovate or extend the property
Poor housekeeping by your tenants, such as unhygienic or untidy living habits
Rust, wear and tear, mould or mildew
The lawful seizure of your property
Loss or damage caused by insects or vermin
Repairs carried out by the tenant with your consent
If you breach the lease agreement
Loss or damage that arises due to keys being provided for property inspections
The tenant using the property for trade, manufacturing or childcare with your knowledge or consent
The lawful seizure of the property
If the property is vacant, is not advertised for sale and no effort is being made to either prepare the property for a new tenant or find a new tenant
Read the terms and conditions of your insurance policy closely for a full list of general exclusions.
How to choose the best landlord insurance policy
Landlord insurance may seem complex and confusing, but keeping a few simple tips in mind can make it a whole lot easier to select the right cover:
Check that pet damage is included. Not all policies cover damage caused by pets owned by tenants or their guests. Check the fine print to find out whether or not this is the case.
Cover while untenanted. It’s also a good idea to check whether you will still be covered if the property is left untenanted for an extended period. You may have to satisfy specific conditions to ensure that cover remains in place, such as actively seeking a replacement tenant.
Building-only vs combined cover. If you’re renting out a fully furnished property, contents insurance is a must. However, if your property is unfurnished, you may decide you don’t need it. Just remember that carpets, curtains, internal blinds and a range of other items are only covered by contents insurance, so you may still be better off with a policy that provides combined building and contents cover.
Shop around. Compare several landlord insurance policies to see how they stack up against each other. Obtain quotes for each suitable policy so you can select the best one available.
Do policies cover me against damage caused by tenants’ pets?
Landlord insurance is not designed to cover damage caused by tenants’ pets. However, you can still find a limited level of damage cover, and liability cover for injuries caused by animals kept on the premises.
Generally you are limited to specific types of damage cover, and insurance for damage caused by pets that are deceptively kept on the premises in breach of the tenancy agreement.
For the most part, landlord insurance is not designed to protect against damage caused by pets outside of liability cover, which can insure against injuries caused by pets to visitors. However, there are specialist landlord insurance policy providers that cover accidental pet damage as a standard part of their policy.
Our top landlord insurance tips
Remember these simple rules to ensure that you get the most from your landlord insurance policy:
Get a signed agreement. Many insurers will not provide cover if you do not have an official lease in place that you and the tenant have both signed. Make sure you have a written agreement before a tenant moves in.
Buy cover before your tenant moves in. Make sure you purchase cover before your tenant actually moves into your property. If they have already moved in and fall behind on rental payments before you buy a policy, your insurer probably won’t provide any cover.
Conduct regular inspections. Regular property inspections are essential not only to minimise the risk of tenants damaging your property, but to also back up any claim you make on your policy.
Keep detailed reports. Completed entry and exit reports with supporting photographs will protect you if any damage arises.
Check exactly what’s covered. If you choose a landlords insurance policy that also covers some of the contents of the property, look closely at the fine print to see exactly what is included. For example, check what fixtures and fittings are listed. Most policies offer protection for damage to items such as pipes and cables, fixed appliances, sheds, exterior blinds and awnings, and in-ground swimming pools.
Not exactly. Landlord insurance generally covers events that lead to the loss of rental income, damage, or theft from your property. Building insurance protects against damage to the property’s structure.
No, there is no legal obligation for a landlord to take out insurance. However, some lenders require you to take out a policy before approving your application for a loan.
Don’t wait until you experience a problem with a tenant to think about purchasing cover. The best time to buy a policy is immediately after you settle on your investment property.
It depends on the policy; not all insurers cover legal costs. Read the terms and condition of your policy closely for full details on what your policy does and does not cover.
Yes. In most cases, you’ll be asked what kind of tenant you rent to early on in the application process. For example, they’ll want to know if you’re renting to students, or a middle-aged couple. Who you rent to affects how much you pay for your landlord insurance. If you rent to socially-active students or those receiving housing benefit you’ll pay more. With a middle-aged couple you’ll likely pay less as they are usually financially secure and are less prone to damaging the property.
Danny is a publisher at Finder specialising in car, life, home, business and pet insurance. He previously worked at the global insurer Aon and has appeared in national media giving advice on insurance. Danny holds a BA in International Business from the University of Plymouth and has undying loyalty to his average-poor football team, Portsmouth FC.
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