Do I need buy-to-let landlord insurance?

Updated 07 January 2022

5min read

Nick Green

Financial Journalist

Updated 07 January 2022

5min read

If you’re planning to buy-to-let, you’ll need special landlord insurance. Landlord insurance is really a collection of different types of insurance, some of which are compulsory for buy-to-lets, some of which are just good to have, and several that are highly advisable.

Here you can find out about your insurance obligations as a landlord, and how best to use insurance to safeguard your buy-to-let business.

What is landlord insurance?

Buy-to-let properties aren’t covered by normal home insurance, since they carry more (and different) risks. Therefore you will need special types of insurance designed for landlords. These will cover the same general risks as ordinary home insurance (e.g. fire, flooding and subsidence) but it also protects you against damage caused by tenants, unexpected legal costs and loss of rental income.

There is no one type of insurance called ‘landlord insurance’ – rather, it is a whole range of insurance types that are specifically geared to landlords. Exactly what is covered by your insurance depends on the policies you take out – and there are lots to choose from.

What is covered by landlord insurance?

Different types of landlord insurance policy protect against different risks. Along with compulsory buildings insurance (to protect the structure of the property itself), you may want to take out cover against:

• Loss of rent, if the property is uninhabited for a while
• Accidental damage to the property or fittings, furniture or appliances
• Your liability if tenants or visitors are injured and claim against you
• Legal costs during any disputes with tenants
• Emergency repairs, e.g. burst pipes, pest infestations or break-ins
• Alternative accommodation for tenants if damage means they can’t live there for a while

Do I need landlord insurance?

There are some policies that you really do need to have, like buildings insurance.

In fact, some mortgage providers will only give you a buy-to-let mortgage you once you confirm that you have certain policies in place.

Why do I need landlord insurance?

Firstly, you might need it to secure your mortgage. But it’s also wise to have a level of cover that balances out financial risks you may be taking.

Can you really afford to replace all the furniture out of your own pocket if there’s a fire? Is the rent vital for your own income, or is it a supplement that you can afford to lose? What if someone becomes seriously injured due to a fault at the property – can you cover the legal fees to help protect yourself? You need to weigh up how much you can afford to lose if something goes seriously wrong.

Do I need landlord insurance if renting to family?

Yes, it doesn’t matter who you’re renting to – every tenant poses a risk. Anyone could injure themselves in your property or accidentally cause damage. You may find, though, that the premium is lower if you’re renting to a family.

Do I need landlord insurance for a flat?

Yes. If you pay a maintenance fee, check whether this provides you with any cover, such as buildings insurance. You can then add on the other policies you feel you need.

Do I need landlord contents insurance?

It depends on what you can afford to lose if there was damage, not just caused by your tenants, but from events like fire, flooding and theft.

If you’re providing furniture and white goods, the cost of replacements can be high.

Which landlord insurance should I choose?

Here is a simple breakdown of the landlord insurance must-haves, should-haves and nice-to-haves.

Must-have

• Buildings insurance – just like standard buildings insurance, this covers rebuilding the property if it is significantly damaged. It might be higher for a buy-to-let property because the chance for damage is increased. This insurance is essential, and your lender will require it.

Should-have

• Landlord liability insurance – this covers you in case a tenant or visitor tries to sue you because a fault at the property has caused an injury or serious illness. You may be able to get this cover built into another policy. It isn’t usually compulsory, although some local authorities do require commercial landlords to have a certain level of cover here.
   
• Contents insurance – you may want this cover if you’re letting the property furnished. It protects decorative features, white goods and furniture you provide against accidental damage and theft, but you will need to make sure the excess isn’t too high to ensure it’s worth making a claim if you need to.
   
• Rental guarantee insurance – this pays out if your tenants fail to pay their rent, so you don’t miss out on rental income. Similar to this is unoccupied insurance, which covers you for times when you have no tenants. You may be able to get both scenarios covered in one policy.

Nice-to-have

• Emergencies cover – these comprehensive policies cover against all sorts of property issues like leaks, break-ins and boiler breakdowns. There are various levels to this cover, including policies that give you access to tradespeople, and policies that pay for alternative accommodation you need to provide.
   
• Accidental damage – this cover protects you against damage to your property, usually caused by people, but it won’t cover you for theft or wear and tear. You may not need this if you have a good level of contents insurance, but do check first.
   
• Loss of rent – although this cover sounds similar to rental guarantee insurance, it’s actually designed to cover you for rental income if the property becomes uninhabitable. You may also be able to include the costs of providing alternative accommodation.
   
• Legal cover – like landlord liability insurance, this cover protects you against tenants making claims against you, but it takes care of the legal costs. Again, you should be able to get this included in another policy.

Multi-property cover

If you own more than one buy-to-let property, you may be able to get one policy to cover them all, which can be much easier to manage. One policy can cover as many as 15 properties initially, and you may be able to add more during the term of your policy. Whether or not it is cost-effective to do this may depend on how similar the properties are; if one poses significantly higher risks than others, for example, then it may be best to cover that one separately.

How much is landlord insurance?

The cost of your landlord insurance will depend on the property itself, the types of tenants you’ll be renting it to and how much you choose to protect. Naturally it will be more expensive if you go for the maximum cover level with the minimum excess option.

As a rule of thumb, you can expect to pay upwards of £150 a year or £15 a month for a fairly solid policy. It’s important you have the right level of cover to protect you, but there are ways to reduce your premiums without affecting your cover, such as:

• Choose tenants wisely – opt for professionals with a steady income stream.
• Refuse pets – animals can damage a property, hiking up the costs of your insurance.
• Keeping the property occupied – minimise the likelihood of break-ins to bring down your insurance.
• Increase security measures – installing good-quality locks and an alarm system can prevent burglaries and make your property cheaper to insure.
• Reduce the furniture you provide – let the property unfurnished and reduce how much you need to cover.

How do you get landlord insurance?

Finding the right policy starts with shopping around. The best way to do this is to consult a financial adviser or mortgage broker who specialises in this kind of insurance. They can search the whole of the market to find you the best deals, providing a more custom-made level of cover that can result in significant savings. A mortgage broker can also help you find the best buy-to-let mortgages.

If you already have landlord insurance, it’s worth shopping around again when the end of your current policy is approaching. Whether or not your situation has changed, you may be able to get a better deal by switching provider.

Getting the right financial advice for your circumstances is key. Find your perfect financial adviser now.