Get cheap cover if you're renting out a property
If you're one of the UK's two MILLION people who rents out a home to tenants then landlord insurance is worth considering. It's not compulsory but can prove useful, so we show you how to get it cheapest.
We've a host of tips to help you decide if it's right for you, including what it covers. Importantly, this guide is for residential landlords who rent out homes, not commercial landlords letting out offices or shops. It is also for landlords who let their homes for long periods (usually defined as six months or more), NOT for Airbnb-style short-term lets.
This is the first incarnation of this guide. Please tell us your experiences in the landlord insurance discussion.
In this guide...
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Landlord insurance explained: The five need-to-knows
Landlord insurance is not compulsory – think of it as souped-up home insurance to cover extra perils such as non-payment of rent or damage by tenants – but it can be very costly to go without it if disaster strikes. Our tips help you decide if it's right for you.
It is NOT a legal requirement but without it you may not be covered if you have tenants
If you're going to be a landlord, you won't be breaking the law if you don't take out specialist insurance. However, if you rent out a property to any kind of tenant and want to be protected in case anything goes wrong, standard home buildings and contents insurance usually won't cover you – you'll need a landlord policy instead.
This is because insurers view the risk of renters living in your property – and the chances of them making a claim on an insurance policy – very differently to you, the owner, living in it instead. Two young students who enjoy socialising renting a flat, for example, pose a greater claims risk to an insurer than an older professional couple who own their property.
Also, there may be some cases where a buildings policy is not necessary. For example, if you own a leasehold property in a block of flats and rent it out, you could find the block freeholder has their own buildings insurance which should cover you in the event of any incident such as a leaking washing machine ruining your floor – and the flat below's ceiling.
Yet not all freeholders will have a comprehensive buildings insurance policy so if you're in this situation, double-check.
Landlord insurance is souped-up home insurance, covering all the usual plus tenant issues
Landlord insurance is usually an umbrella term given to different strands of cover bolted together for anyone who owns a home they rent out, and it's entirely up to you to decide what it includes, though the more you add the more it costs. These are your options:
- Buildings cover. To rebuild or repair your home if the structure is damaged.
- Cover for YOUR contents. If stolen by someone other than your tenant (see below as there's separate cover for this) or damaged by fire, flood and more. It will NOT pay out for a tenant's contents.
- Loss of rent. If tenants don't pay up or are rehoused if your home's damaged.
- Accidental/malicious damage or theft by tenants. If your goods or furnishings are stolen or damaged by tenants.
- Legal expenses. If you take action when dealing with tenant disputes.
- Public liability. If a tenant or visitor is injured on your property and claims against you.
- Property damage due to illegal cultivation of drugs. By your tenant, of course.
- Eviction of squatters. Where a tenant simply won't leave.
There are other points to watch out for too:
You may pay a membership fee for organisations such as the National Landlords Association. This gives you access to information helping out with issues you may have, provides a forum to discuss problems with other landlords and gives basic legal advice. But it's in no way a replacement for landlord insurance.
Whether you include contents as part of your landlord policy could depend on how much furniture you have in the property – and its quality.
For example, if it's basic furniture that would be inexpensive to replace, it may not be worth insuring. Likewise if you're offering the property completely unfurnished. However, if you're furnishing a property to a high standard, you may want to consider covering it against theft or damage.
Tenants' contents won't be covered under a landlord insurance policy so you may want to make that clear to them. It may sound obvious but many renters won't be aware of the risks and may mistakenly believe they're protected by you instead.
Many landlords rent out a leasehold flat in a large building or housing block. In this common scenario, it's likely you'll pay a service charge to the freeholder, ie, the owner of the building your flat is located in.
If something happens to the building or its structure, the cost to rebuild or repair it will be covered by the freehold owner's buildings insurance. This effectively means you don't need a standalone buildings policy.
And buildings insurance policies taken out by the freeholder or a management company on behalf of leaseholders often cover structural damage even if the problem began in your flat – as long as you weren't wilfully negligent.
For example, this should include the cost of repair if a pipe burst in your property – or that of a neighbouring property – and ended up doing serious damage to your walls or ceiling.
However, it'll be worth double-checking the precise nature of the buildings insurance cover for your block, to be safe – it isn't always the case. Ask the freeholder for a copy of the document to be sure.
The majority of landlords will need a mortgage to buy their property and since almost all lenders insist on buildings insurance as a requirement before they'll give you the cash, you'll need a policy which includes it.
While landlord cover is not a must, it does include buildings insurance so will fit the bill. Normal buildings cover is enough to satisfy the lender but may leave you short as explained above.
Unsurprisingly, lenders want to know that, in the event of a property being severely damaged or even needing to be rebuilt, you've got a policy in place that'll pay out to do this.
If you're in a strong enough financial position to be able to buy a buy-to-let property without the need for a mortgage, buildings insurance is much less of an issue. But a policy will still be worth taking out as, without it, you'd have to absorb the cost of any repairs for structural damage.
There are growing numbers of accidental landlords – those who marry and move into a partner's home and rent out their old one, for example, or who inherit a property and decide to let it out rather than sell.
Fail to let your insurer know (and, just as important, your lender!) and any claim on the cover would be invalid, since your existing home insurance policy won't be deemed valid because you've now got tenants in.
For convenience, you can ring your existing insurer which – in most cases – will simply 'upgrade' your ordinary home insurance policy into a basic landlord policy. It takes just one phone call and there'll usually be a higher premium to pay to reflect this greater risk.
But do this and you'll usually find your new policy won't include key landlord-specific extras such as loss-of-rent guarantee or public liability. Instead, you'll likely be better off looking for a specialist landlord policy from elsewhere that includes all the add-ons as well as basic contents and buildings cover. Ensure you get the cheapest deal by doing a comparison using our step-by-step guide below.
Being a live-in landlord shouldn't have too much of an impact on your existing home insurance – in most cases it won't need to change at all. Although you're essentially your lodger's landlord, your home insurer will tend to consider it much less of a risk because you're still living in the property.
Call your existing home insurer to let it know the change in arrangements. You may see your premium rise slightly but if it's happy, it may well keep the cost the same. Also, you can now earn £7,500 tax-free each year from letting a spare room, under the Government's Rent a Room scheme.
Got more rooms to rent out? If you're a live-in landlord and rent out several other rooms in your home to tenants, your insurer will raise the premium accordingly. However, you should still be able to keep your existing ordinary home insurance.
Insurers will ask what your tenants do (and may charge more if they're students or on housing benefit)
When you buy landlord insurance, you'll be asked what kind of tenant you rent to – usually early on in the application process.
You'll generally be asked to choose from a dropdown box or to tick a box showing what type of tenant you have. These are the main categories you can choose from:
- Those in receipt of housing benefits
- Asylum seekers
- A mix of the above
It matters because the type of tenant you rent your property out to will have an impact on how much you pay for landlord insurance. Choose to let to students or those in receipt of housing benefit (and the unemployed) and you'll pay more.
This is because these groups' lack of income – or low level of take-home pay – means they're a higher risk to insurers, which worry you'll struggle to fill your rental property. In particular, you'll pay a much steeper premium if you want your policy to cover you for non-payment of rent.
Not every insurer is willing to cover all types of tenant but most will give you a broad choice of tenant categories. However, you must always make it clear to an insurer who it is you'll be renting to. Fail to do so and you could invalidate your policy.
You'll need extra cover if the property is left vacant for more than 30 days
Most policies will cover you for a claim if your property's left empty for a short period, usually 30 days – handy if you're planning a quick renovation or kitchen overhaul. So if thieves broke in or your property suffered damage from a water leak, you'd get a payout.
But if you know the property is going to be sitting empty for several months – for major works, say – you'll need to tell your insurer and agree additional cover, or pay extra to take out a separate 'unoccupied property insurance' policy to add to your existing landlord cover.
If you don't, you could find yourself uninsured and out of pocket during that period if the property is taken over by squatters, vandalised or damaged by fire or flood.
You MUST provide smoke and carbon monoxide alarms – if not, you may invalidate your policy
These alarms should be on every floor of the property you're letting and you'll need to test them frequently. You also need to make sure the property is safe for tenants – eg, having up-to-date building and electrical installation safety regulation certificates – and carry out any necessary repairs.
Plus, you'll need to have all gas and electrical equipment checked regularly and ensure it meets safety requirements. Fail to do so and insurers can deem your policy invalid. Your tenants can then take you to court and you won't be able to use legal cover to fund the claim.
See a full rundown of your landlord responsibilities including keeping your tenant's deposit safe in a deposit protection scheme.
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How to make a claim on your landlord insurance
Claiming on your landlord insurance should be straightforward, and needn't be daunting. If you've read and understand the terms and excesses on your policy, you shouldn't be in for any nasty shocks. But in the event you need to claim, take two simple steps...
If it's a theft or serious damage to your property by unruly tenants, notify the police
If something's stolen from the property or it's badly damaged by misbehaving tenants, you'll need to get a crime reference number to make a claim. Report the incident to the police as soon as you can to make sure your claim doesn't hit the skids.
Submit your claim as soon as possible
Contact your insurer as soon as you can to avoid any administrative hold-ups; if it's a complex claim, it may take a while to be processed, so the sooner you start, the better.
What to do if something goes wrong
First, you need to complain to your insurance company directly. If it doesn’t respond, or if you don’t like what it says, then you don’t need to just take it.
You can escalate your complaint to the free Financial Ombudsman. The ombudsman is an independent adjudicator which will make the final decision on a claim if you are locked in a dispute with your insurer. For more on how to make a complaint, read our Financial Rights guide.
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