Landlord insurance can be expensive and difficult to understand… So, do you really need it? And if you decide to have it, what kind should you have?
The four main types of insurance that you may want to consider as a landlord:
• Buildings insurance
• Contents insurance (You would only need this if your property is let furnished)
• Rent guarantee insurance
• Landlord liability insurance.
Buildings Insurance
It is most important to have buildings insurance. This needs to cover your property against fire, subsidence, floods and extreme weather. This is a condition of any mortgage, but is still very worthwhile taking out if you own your property fully. Most landlord buildings policies also cover the loss of rent and temporary accommodation (for example, if a flood makes the house uninhabitable).
How much do I need to insure my property for?
Buildings insurance is there to cover a repair or to knock down and rebuild your property if you were to have a fire, subsidence or damaged caused by extreme weather. The amount you are insured for is usually lower than the market value of the property. Insuring a property for more than the rebuild cost will not make a difference if you have to make a claim but will mean you are paying higher premiums.
Contents Insurance
Landlord’s contents insurance is only usually relevant if you let a property out furnished, though it does also cover appliances and certain fitted items (such as carpets) in unfurnished rentals. Most policies do have an excess though and single item limit so it would be worth researching first as it could make more sense to pay any repair costs yourself.
Rent Guarantee Insurance
With this type of policy the insurer pays your rent if your tenant doesn’t. Make sure you look at the fine print though – some policies will only come into force after your tenant is already in a certain amount of arrears and some will limit the amount of rent that can be guaranteed or the number of months they will cover you for.
If you take out a rent guarantee policy, make sure you chose one that includes legal expenses to evict the tenant. Your tenants should be fully checked and references before they move in but, even good tenants can lose a job, be unwell or split up with a partner and stop paying rent.
Landlord Liability Insurance
If a tenant or tradesman injures themselves in our property did you know that they can potentially sue you? The risk might be small but the figures could be large if it ever did happen. Landlord liability insurance can often be added on to your buildings policy for a small charge.
Should you use an insurance broker?
Insurance may seem easy to buy online where you know you will find the lowest prices but … What happens if you miss something among the terms and conditions? You could end up with an incorrect or even invalid policy.
Our advice is to speak to an insurance broker. They can lead you through the fine print and find the right policy for you.
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