If you rent out a residential property to tenants, then you should look at getting landlord insurance. It’s not a legal requirement but it’s worth serious consideration.
Many people are unaware that in the event of a problem with your rental property, standard buildings and contents insurance won’t cover you. If you rent out a property to tenants, you’ll need a specialist landlord policy instead. This is because insurers view tenants as a greater risk to your property as they are less likely to care for it than an owner-occupier.
It’s not compulsory to have a policy in place, but you may find that it pays for itself in the long run.
What does it include?
Not all landlord insurance policies are the same. Some will only cover you for the basics, while others are more comprehensive. Some offer the option to bolt on extras as required. As with any policy, the more it includes, the more it will cost you. It’s worth shopping around on the financial comparison sites to find the best deal for you.
Most landlord insurance policies will include:
- Buildings insurance – just like standard buildings cover, this will pay for rebuilding or repairing your property if it is damaged.
- Contents cover – this element covers you if your belongings are damaged or stolen by your tenant. It doesn’t cover your tenant’s contents (they’ll need their own policy) and it won’t pay out if your belongings are stolen by a third party (i.e. someone other than your tenant).
- Public liability – this covers you for any claims arising from tenant or visitor injuries that occur on your property.
- Loss of rent – this will cover you for losses if existing tenants don’t pay their rent. It doesn’t cover long periods when the property is empty because you’ve been unable to secure a tenant.
- Legal expenses – if you take legal action against a tenant, your costs will usually be covered as part of your policy, and this includes eviction of squatters.
Bear in mind, if you rent your property out as unfurnished, you probably won’t need contents insurance. Likewise, if you own and rent out an apartment in a larger block, your buildings insurance may be included as part of a block policy. This is where a ‘pick n mix’ approach to cover can come in useful.
Choice of tenant
When you apply for landlord insurance, you’ll need to state what kind of tenant you let your property to. This will affect how much you pay for your insurance policy. For example, if you rent to students or people on housing or unemployment benefits, you’ll generally pay more as they are seen as a higher risk to insurers. Some insurers don’t even offer cover if you rent out to higher risk groups.
Your responsibilities
As a landlord, you have a number of legal obligations that you must meet. Failure to do so can result in your policy being invalidated.
For example, you must provide and fit working smoke and carbon monoxide alarms on every floor of your property, and they must be tested regularly. If you don’t do this and the property is damaged by fire, you won’t be covered.
You’ll need to have all gas and electrical equipment in the property checked regularly, and carry out any necessary repairs to ensure the property is safe for your tenants. You’ll also need up-to-date building and electrical installation certificates – and you may be asked to provide copies of these by your insurer.
The points outlined above do not represent an exhaustive list of your responsibilities as a landlord. You’ll find this here.
If you’re thinking of buying an investment property to rent out, at Enact we’re on hand to offer you help and advice.
