A guide to landlord insurance

Landlords in the UK have access to a wide and varied range of insurance policies. Find out what cover is on offer and what each type of landlord insurance policy can do to help you get the most from your investment.

From property damage to rent arrears, landlords have access to insurance policies for every eventuality. And thanks to the popularity of buy to let, premiums have become more competitive and policies more flexible in recent years.

Depending on the terms of your landlord mortgage, some insurance cover may be required. Other types of cover are optional extras. Below we run through the most popular types of policy available to landlords.

Landlord’s buildings insurance

Mortgage lenders will wish to see their loan security protected from accidental or purposeful damage. Thus, like homeowners, landlords must usually take out buildings insurance as a condition of their mortgage.

You may also need to take out buildings insurance if you don’t have a mortgage. If you own a leasehold property, the terms of your lease may state that you must insure the building with a named provider. Alternatively, the freeholder may insure the building and charge you the cost of the premiums.

But even if it isn’t a condition of a lease or a mortgage, taking out buildings cover is a good idea. A good buildings insurance policy covers the cost of:

  • repairing damage to the structure your property, including fences, garages and sheds
  • replacing cables, drains and pipes
  • if necessary, a complete rebuild of your property

The types of damage that buildings insurance protects you from include:

  • aircraft or vehicle collisions
  • burst or frozen water pipes
  • explosions and fires
  • fallen aerials, lampposts, satellite dishes or trees
  • natural disasters such as earthquakes, floods and storms
  • ground heave and subsidence
  • vandalism

Standard buildings insurance policies don’t offer the level of protection that a tenanted property needs. In fact, most domestic buildings policies exclude let properties. This is an important consideration if you are letting out a home you previously owned or have inherited.

It is wise to protect your investment as best you can. Make sure that the sum insured by your landlord’s building insurance is enough to cover the full rebuild cost.

Landlord’s contents insurance

Most rental properties contain fixtures and furnishings provided by the landlord, be they a few white goods and kitchen fittings or full furnishings for each room.

Many landlords, particularly those who let ‘unfurnished’ properties, underestimate the cover that they need. Carpets and flooring, build-in cupboards, work surfaces and even contents locked up outside in a shed or garage require cover. If they are damaged, lost or stolen, an uninsured landlord will have to fund the cost of repair or replacement in full.

Most policies offer new for old’ cover (the full cost of replacing items), though some only cover items for their current costs. Some policies also offer cover for items that the policyholder temporary removed from the premises, such as when they are cleaning or renovating their property.

(Bear in mind that damage due to wear and tear is a common exclusion from landlord’s contents insurance policies.)

It can cost thousands of pounds to furnish a rental property. To protect your assets, consider taking out a dedicated landlord’s contents insurance policy.

Rent guarantee insurance (RGI) and loss of rent insurance

Many landlords like to cover themselves against unexpected loss of rent. Two types of policy protect against this: loss of rent insurance and RGI.

Rent guarantee and loss of rent policies are particularly important for landlords who have no other income, and rely on their rent to meet mortgage repayments. Rent payments can stop, sometimes without warning, if:

  • the tenant falls into arrears or defaults on their rent
  • the property becomes uninhabitable
  • the tenant abandons the property

Loss of rent insurance allows landlords to claim for rent lost when their property becomes uninhabitable. This may be as a result of fire or a flood. Some loss of rent policies also cover the cost of finding alternative accommodation for your tenants.

RGI protects against arrears and defaults. If your tenant falls into arrears, your RGI insurer will pay rent due to you in their stead, up to a certain amount. They will then chase the tenant for the money.

Landlords have the right to evict their tenant for non-payment of rent. But if the tenant won’t leave, the landlord’s only recourse is to get a court order, which can be a costly and lengthy process. As well as lost rent, some RGI policies provide cover for legal costs as well.

Be wary of gaps in RGI cover. Some policies do not cover a certain period at the start of the tenancy. There is also usually an excess. Most policies have an upper limit on the amount of rent that they will cover, either per month or across the policy term.

Landlord’s liability insurance

Landlords have a legal duty, outlined in the Landlord and Tenant Act 1985, to keep their properties in a good state of repair. They also have a duty of care, under the Defective Premises Act 1972, to their tenants, other occupants, and any visitors to the property.

This means that if someone suffers an injury in your property, they could sue for damages. This includes employees you have instructed to be on the premises, such as agents, electricians or gas engineers.

Landlord’s liability insurance offers cover for court fees, solicitor’s costs and, if it comes to it, damages. Policies can insure property owners up to the sum of £2 million, and in some cases even more.

Life insurance

Many landlords invest in property to provide for their retirement, and often have beneficiaries in mind. It can be useful to plan cover in case of accident, sickness or death, so that the mortgage can continue to be paid and the property can continue to generate an income.

Life insurance policies provide a cash lump sum to the beneficiary if the policyholder dies. Mortgage protection, on the other hand, covers the policyholder’s mortgage payments if they pass away.

Critical illness cover (CIC) policies pay out a lump sum if the policyholder is diagnosed with a serious illness, such as cancer, heart attack or stroke. The money can go towards medical treatments, carers or living costs, and can prevent landlords from needing to sell some or all of their assets to fund their care.

An income protection policy pays a monthly benefit to replace the policyholder’s earnings if the policyholder falls ill or suffers an injury. For landlords who rely on income from employment as well as rental income, income protection cover can help them maintain their lifestyle without having to compromise their investment.

A shorter-term form of income protection is also available. Accident, sickness and unemployment (ASU) insurance, also known as lifestyle insurance, pays out a monthly benefit if the policyholder can’t work due to sickness or injury. Unlike critical illness cover, the policy also offers cover for against mental health problems, such as stress, depression and anxiety, and spinal problems.

Landlord insurance tips

  • The level of protection you require depends on your personal and financial circumstances. It also depends on your area of investment and your target market. Letting to students, for example, might be considered higher risk in terms of potential damage and rent arrears than letting to a professional couple. There are landlord’s insurance policies designed specifically for each situation.
  • There are many types of cover available, and many insurers offer tailor-made policies that include all of the elements the policyholder requires.
  • Finally, as with any insurance policy, make sure that you read and understand the exclusions. The insurer should always allow you to read the policy document in full before you agree to buy the policy.

This information should not be interpreted as financial advice. Buy to let mortgage rates are subject to change. Speak to our advisors for a mortgage illustration.

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