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Landlord Insurance Explained

Having the right landlord insurance is vital to any residential letting business, but it’s not always easy to identify the cover you need.

Read on to find out the protection landlord insurance offers, the different types of cover and how much a policy costs.

What Is Landlord Insurance?

Landlord insurance is a type of insurance product that protects property investors from various issues, like someone breaking into the home, fire or flooding.

If one of these events should strike, the cost of repairing or replacing lost or damaged parts of the property is likely to be high.

Landlord insurance removes the stress of finding the money to pay these bills should the worst occur.

The cover is often bundled with other insurance to guard against other risks, such as non-payment of rent or accidental damage.

Landlord insurance is not compulsory, but the cost is deductible against profits as a business expense. However, a mortgage lender often stipulates the level of building cover needed as a loan condition.

Here’s a list of the main types of landlord insurance and what they do:

Buildings insurance

Pays for rebuilding if a property is damaged or destroyed, for example, after a fire or repairs roof damage after a storm.

Landlord contents insurance

Covers loss, damage or destruction of items belonging to a landlord in a rented home. The insurance looks after items listed on an inventory in furnished or unfurnished lets.

Landlord liability cover

Deals with legal expenses and compensation costs should anyone claim for injury or damage to their possessions due to something happening at a rented home, such as tripping on a loose stair carpet.

Covers the cost of taking legal action, for example, going to court over a boundary dispute or evicting a tenant.

Rent guarantee

Insurance that pays the rent for a few months if the tenant can’t or won’t hand over the cash.

Unoccupied property cover

Insurance that protects empty homes for more than 30 days.

Most providers have a list of add-ons to beef up your policy at extra cost. These include:

Alternative accommodation

If a rented home becomes unfit to live in, this cover pays for a tenant to stay somewhere.

Emergency repairs

Provides tradesmen to deal with emergencies, like stopping leaks or repairing broken windows.

What’s not covered by landlord insurance

Claims to repair or replace stolen, damaged or destroyed tenant belongings are not covered by landlord insurance. Renters must arrange and pay for their policies.

Issues relating to motor vehicles are also excluded as they must have separate compulsory insurance.

Calculating The Rebuild Cost

The rebuild cost is not the same as a property’s market value. The market value includes the cost of the land the property stands on, but the rebuild cost does not. The amount is based on clearing the plot and building an identical property on the site.

A free calculator for working out the rebuild cost is available online.

Holiday Lets And Second Homes

Specialist insurance covers renting out holiday lets and second homes.

Although some landlord liability and damage protection are offered by short-let websites, like Airbnb, for comprehensive cover, owners should take out their own cover.

Insurers consider there is a greater risk in renting out holiday properties because they stand empty for longer than long-term lets. This can increase the policy’s cost by a few pounds a month.

Don’t take out standard home cover for a second home or holiday let, as the insurer may refuse a claim.

Landlord Insurance FAQ

No, landlord insurance is not compulsory, although lenders may demand buildings insurance as a mortgage condition. The only compulsory insurance for landlords is employer liability cover, which is needed if a property business has one or more employees.

Don’t forget to check if you should buy employer liability cover if you are employed by your own property management company.

How much does landlord insurance cost?

Asking for a quote is the best way to calculate the cost of landlord insurance. The price depends on the property, location and the type of tenants. The average cost per property is £170 a year for a home with a £200,000 rebuild cost.

Can I combine landlord insurance for several properties?

A portfolio landlord is someone who owns two or more investment properties. Most landlord insurers will consider discounts for landlords switching or renewing policies for several homes.

Will standard home insurance cover a buy-to-let?

Always buy specialist landlord insurance to cover investment properties. Standard home insurance is cheaper but does not cover all the risks of renting a property, such as voids of more than 30 days.

How is a holiday home insured?

For insurance purposes, a holiday let or second home is an investment property and is treated much the same as a buy-to-let home. The issue for insurers is when a holiday home stands empty, which increases the risk of a break-in or emergency that needs dealing with, like a burst pipe, going unnoticed for weeks.

What is a property void?

A void is the property industry term when a building stands empty. Standard home insurance usually covers voids for up to 30 days, but specialist policies for landlords or holiday let owners are for more extended periods.

What’s the difference between buildings and contents cover?

Although both types of insurance often come together as a single bundle, they are different policies.

Buildings insurance covers the repairs or rebuilding damage to the structure of a property, while contents insurance deals with the loss, damage or replacement of items like white goods, furnishings or personal possessions.

So, if tiles fall off the roof, the claim is through buildings insurance, but if a toddler falls and accidentally breaks the TV, that’s a contents insurance claim.

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