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Letting out a property can be a fantastic way to generate extra income, but it also comes with inherent risks. From unexpected damage caused by burst pipes to accidental or even malicious actions by tenants, there's a lot that can go wrong. Fortunately, having the right insurance in place can significantly reduce these risks and provide you with peace of mind regarding your rental properties.
This guide explores nine types of insurance you should consider for your rental property. Some, like building and contents insurance, are essential. Others are optional extras that offer additional protection depending on your needs.
1. Landlord Buildings Insurance
This is a prevalent type of coverage. It protects you financially if your rental property's structure is damaged and requires rebuilding or repairs. Most, if not all, landlord insurance policies include building insurance.
Here are some common examples of what it covers:
Damage caused by natural disasters or severe weather
Subsidence
Fire or smoke damage
Theft or vandalism
Floods or burst pipes
It's important to note that building insurance typically excludes:
Normal wear and tear
Lack of proper maintenance or negligence
Damage caused by pets or animals
2. Landlord Contents Insurance
While you're not responsible for insuring your tenants' belongings, landlord contents insurance protects your furniture, white goods, and other items in a furnished or partially furnished property. This coverage is often included alongside building insurance in landlord insurance policies.
Here are some typical scenarios covered by contents insurance:
Damage to your items caused by fire or flooding
Theft of your belongings from the rental property
Damage to appliances, gadgets, and electrical equipment
Damage to clothing and linen
Some policies might even cover:
Malicious damage caused by your tenants to your items
However, contents insurance generally excludes:
Damage to the property's structure
Damage caused by normal wear and tear
The natural breakdown of your appliances or items
Items exceeding the policy's coverage limit
3. Accidental Damage Insurance
This type of insurance can be added to your existing contents or building insurance policy. It covers the repair or replacement costs of anything in your rental property accidentally damaged by you or your tenants.
Some common examples of what it covers:
Stains on carpets
Damaged curtains or blinds
Damaged appliances
Broken windows
Accidental damage to walls or pipes
Flood damage caused by a left-on tap
Accidental damage insurance typically excludes:
Malicious or deliberate damage
General wear and tear
Damage caused by pets or animals
4. Malicious Damage Insurance
This coverage might be included in your policy or offered as an optional add-on. It protects you from financial losses due to malicious or intentional damage to your property.
The definition of "malicious damage" can vary between policies. Some might cover damage caused by someone without legal permission to be on the property, like burglars or vandals. Others might extend coverage to include malicious damage by tenants or their guests. Carefully review the policy wording to understand what's covered, the applicable excess, and if there are additional costs for coverage against deliberate damage by your tenants.
5. Landlord Liability Insurance
If a tenant, contractor, or visitor gets injured on your property and decides to sue you for compensation, landlord liability insurance (also known as public liability insurance) can protect you. It covers the legal costs of defending yourself in court and any awarded compensation (up to the policy's limit). This insurance is usually included in a standard landlord insurance policy but might require requesting it as an extra.
Here are some common situations covered by landlord liability insurance:
A tenant trips on loose flooring and gets injured.
A loose tile falls from the roof and injures a pedestrian, tenant, or car.
Poor maintenance leads to leaking pipes, damaging the tenant's belongings.
6. Legal Expenses Insurance
This type of insurance, sometimes referred to as deposit replacement insurance, can help cover legal costs if you have a dispute with your tenant. It's often included with public liability insurance. This policy ensures your legal fees are covered if you need to go to court over a tenancy-related issue, such as evicting a tenant or pursuing unpaid rent.
Alternatively, you can opt for deposit replacement insurance. Instead of a traditional deposit, the tenant pays the insurer a non-refundable fee (usually around one week's rent). If there's a disagreement regarding damages to your property, the policy will pay out a predetermined amount of rent (often equivalent to six weeks). This offers more protection than a standard deposit, and some policies might even cover any legal expenses incurred.
7. Unoccupied Property Insurance
Standard landlord insurance typically covers vacant properties for a set period, usually between 60 and 90 days, although it might be higher for student rentals. If your property remains unoccupied for longer, consider obtaining specialized unoccupied property insurance.
Empty properties are more susceptible to break-ins or damage because no one is there to identify problems or deter criminals. Therefore, it's crucial to have your rental property protected.
8. Rent Guarantee Insurance
Also known as tenant default insurance, rent guarantee insurance safeguards you against financial loss if a tenant fails to pay rent. This is a vital insurance policy if you rely on your rental income.
This insurance should cover lost rent due to tenant arrears or your inability to rent out the property because of damage sustained during an insured event. However, not all policies cover both scenarios, and some might only cover a portion of the rent if the property is unrentable due to damage.
9. Landlord Home Emergency Cover
If you self-manage your property, you might receive calls from tenants reporting emergencies at any time. Landlord home emergency cover provides you and your tenants with 24/7 access to repair services for issues like:
Plumbing and heating problems
Drain and sewer issues
Electrical problems
Infestations
Lost keys
This coverage grants you access to a team of certified professionals who will address the emergency as soon as possible (usually the same day) to prevent further damage.
Tenants can typically report problems directly. So, if you're unreachable or unable to handle the situation immediately, you have peace of mind knowing the emergency will be handled professionally in your absence.
Here are some common issues covered by landlord home emergency cover (up to the claim limit):
Plumbing or heating emergencies (some policies include boiler cover)
Failure of domestic electric, gas, or water services
Lost or broken keys
Roof damage or leaks
Blocked drains
Burst or leaky pipes
Pest removal
Overnight accommodation costs if the property becomes unsafe for your tenants
What Insurance Do I Need as a Landlord?
Landlord insurance isn't mandatory by law, and if you fully own your rental property, you technically aren't required to have any insurance. However, if you have a buy-to-let mortgage, the lender will likely require standard landlord insurance that covers the building structure at a minimum.
The specific inclusions of standard policies vary significantly, so it's crucial to choose carefully. You'll want to select a coverage level that aligns with your risk tolerance. Opting for additional add-ons or specialized policies that cover missed rent payments or deal with home emergencies can provide significant peace of mind regarding your rental property.