Landlord Home Insurance: Do You Need It?

Landlord home insurance helps protect against financial losses for any damage to a rental property. We review if you need landlord insurance, what it covers and how much insurance you need.

Jeff Salway Published on 24 September 2021. Last updated on 25 September 2021.
Landlord Home Insurance: Do You Need It?

When you are letting out a property, the list of jobs to tick off can feel endless – especially when you’re doing it all yourself.

Some important tasks can inevitably be overlooked, particularly if they are not legally required. Landlord insurance might fall into this category if you are not sure if you need it, or if you just don’t think it’s necessary.

But while landlord insurance isn’t a legal obligation, there are several good reasons why tailored cover is essential.

What is landlord insurance?

As with other home insurance products, a landlord insurance policy consists of buildings and contents cover. But it is different to standard home insurance due to the range of add-ons, which are specific to the needs of landlords.

A landlord insurance policy provides protection against financial losses in the event of problems with a rental property.

» MORE: What is contents insurance?

Do you need landlord insurance?

While landlord insurance is not legally required, it may still be necessary. That is because lenders will rarely offer a buy-to-let mortgage without valid landlord insurance in place.

Even if that wasn’t the case, landlord insurance offers several important features that standard home insurance doesn’t include.

More importantly, a regular home insurance contract won’t cover a rented property where you are not a resident. This means an insurer may reject a claim on traditional home insurance if the property is occupied by tenants.

It is also about peace of mind, considering the costs associated with issues such as repairs, replacements and lost rent.

What does landlord insurance cover?

A typical landlord insurance policy contains many of the same features as traditional home insurance with its two main components: buildings cover and contents cover.

Buildings insurance covers the physical building structure and permanent fixtures and fittings – such as a built-in kitchen – if they are damaged or destroyed after an insured event, such as a fire or a flood. Contents insurance is for furnishings, such as sofas and freestanding appliances, and covers the cost of replacing or repairing them if they are damaged or stolen.

Accidental damage cover may be included, or it may be an optional extra. This would insure against the cost of repairs or replacements if a tenant causes damage to your property by accident.

What are landlord insurance optional extras?

Additional features tend to differentiate landlord insurance from standard home insurance. You may get cover for:

  • Alternative accommodation for tenants if the property is uninhabitable after a fire or flood.
  • Lost rent if the property becomes uninhabitable and tenants are rehoused.
  • Lost rent if your tenants fail to pay.
  • Compensation and legal costs for injury caused to someone on the property.
  • Legal expenses due to tenant disputes or eviction proceedings.
  • Lost or damaged keys.
  • Home emergencies, with access to 24/7 assistance to fix a sudden issue.
  • Accidental damage if your tenants unintentionally damage your property.
  • Malicious damage to your building or belongings by tenants.

» COMPARE: Landlord insurance

What doesn’t landlord insurance cover?

Exclusions to landlord insurance cover are as useful to be aware of as the features that are included.

For example, tenants’ possessions are not covered by the contents insurance part of a landlord insurance policy – tenants will need to take out their own contents insurance.

A few providers cover malicious damage caused deliberately by tenants, though malicious damage by third parties, such as vandalism and burglary, may be covered as standard.

Do landlords need contents insurance?

A comprehensive policy would include both buildings and contents insurance.

However, not all landlords need both. For example, contents insurance won’t usually be necessary if you are letting out an unfurnished property.

What about houses in multiple occupation (HMOs)?

An HMO property is one shared by at least three tenants from more than one household, all using the same toilet, bathroom or kitchen facilities. Where there are five or more tenants, the property is classified as a large HMO. For example, multiple bedsits in one building or student accommodation might fit into this category.

If you are letting out one or more HMO properties, it is likely you will need to take out HMO landlord insurance.

Insurers will typically see HMO properties as higher risk than a single property, due to the number of households living there and the greater use of the shared facilities. This means insurers may not pay out if a normal home or landlord insurance policy is taken out for an HMO.

This increased risk can result in higher premiums, though if you have several HMO (and other) properties, you may be able to reduce costs by insuring them all on one policy.

How much landlord home insurance do you need?

The amount of cover you need depends on what you are insuring. For example, buildings insurance is based on the estimated cost of rebuilding a property from scratch. This is different to the market value, so it may be worth asking a surveyor to give you an estimate.

Alternatively, you can try the Association of British Insurers rebuilding cost calculator.

Similarly, contents insurance is based on the contents’ replacement value, which is the estimated cost of replacing all the items that you need in place for your tenants, including potentially expensive white goods such as fridges and washing machines.

It is important to be realistic about the replacement values, or you might risk underinsuring your rental property and being left out of pocket. On the other hand, overestimating might leave you paying higher premiums unnecessarily.

Other factors dictating how much cover you need include the type of building, the type of tenants, how many properties you are insuring and the number of add-ons you need.

Does landlord insurance cost more than standard cover?

Landlord insurance is generally a bit more expensive than standard home insurance, particularly if it’s an HMO policy.

This is because insurers see rental properties as higher risk. They believe, for instance, that tenants are less likely to take good care of a building and its contents than an owner might.

A recent study suggested that landlord building insurance in the UK costs, on average, £170 a year, based on a rebuild value of £200,000. Premiums increase significantly once contents insurance and optional extras are added on.

» COMPARE: Home insurance policies

Image source: Getty Images

About the author:

Jeff is a freelance journalist who writes across finance & business. He was the personal finance editor at The Scotsman & Scotland on Sunday & a member of the Financial Services Consumer Panel. Read more

If you have any feedback on this article please contact us at [email protected]