As a landlord, you have to be at the beck and call of your tenants. Dealing with renter’s housing dilemmas, damage to property and ensuring all goods and equipment are in full working order.
Depending on your renters, this can be a tiresome job – students for example, have a reputation for creating more excessive damage and wear and tear. From wine spilled on the carpet, to flooding the bathroom or leaving the back door unlocked and vulnerable to burglars.
There is a range of landlord insurance to protect the contents of the property and the landlord’s own belongings that may be in the building. Damage caused by natural problems such as fire, damp, earthquakes, flooding and storms can be covered as well as theft and malicious damage.
Standard contents insurance does not cover a rented property, so as a landlord you must not rely upon your standard homes contents insurance because if something where to go wrong, you would likely not be protected.
What does landlord insurance cover?
A basic landlord insurance policy will protect you for more than an ordinary home contents policy, but advisor’s suggest that if your property is particularly valuable, you might be better with a slightly fuller, more comprehensive insurance policy. This would include coverage for things like public liability, loss of rent and legal costs should things get messy.
Really it is up to the individual to assess the worth and value of the property to them, weighed up against the accumulative cost of an insurance policy, to decide what level of coverage they feel comfortable with.
Obviously if you own more properties, the risk of problems arising increases, but so do the profit margins. In this case you might take a little more risk, knowing that if you have to pay out for repairs on one property, the profits from your others will cover this cost and more – keeping losses to a minimum. You can use this logic, or you can take the cautious more sensible option of having extensive an landlord insurance policy to cover all of your properties for all manner of possible scenarios. That way you can sleep soundly knowing that your valuable investment is protected to the nines.
So what does landlord insurance cover your for? Let’s answer this question by thinking about worst-case scenarios.
Contents insurance
Imagine: it’s 3am, you’re fast asleep, and your phone starts to vibrate loudly on your bedside table. If you rent property to paying tenants, it’s likely that the first thought to enter your mind will be “what now?”.
It’s one of your tenants on the phone, they’ve returned home from a night out to find that the whole kitchen ceiling has fallen through. One of the other tenants accidentally left the bath taps running, flooding the bathroom and causing the entire downstairs kitchen to be ruined by water damage and fallen debris.
Who’s going to pay for all this damage? Under a specialised landlord insurance policy, this type of damage is considered accidental damage, and the cost of labour and replaced equipment would be covered. If the tenants need to be temporarily rehoused whilst the building work is done, some extensive landlord insurance policies will also cover this cost.
Malicious damage
Suppose a tenant has an argument with their partner one night, and decides to take it out on the traditional stained-glass front door; kicking it in and smashing the glass. A landlord insurance that protects against malicious damage would cover the cost on a ‘new-for-old’ basis, covering the cost to replace the door and the stained glass.
It is fairly standard with landlord insurance to have key, lock and glass coverage as loss of keys, door damage, smashed glass and burglary requiring changed locks, are some of the most common issues that landlords face.
Loss of rent
Loss of rent is not always included in landlord insurance policies, but it is a good idea to find one where it is. In cases where the property is damaged to a point that it is uninhabitable, and so you have no rent coming in, some insurance policies will cover for these financial losses.
This element of landlord might be particularly important if you rely on the rental payments to pay a mortgage. If flood, earthquake or fire has left you without tenants, your mortgage will of course still need to be paid, hence why loss of rent insurance is a good thing to look for when choosing a landlord insurance policy.
Moreover, if a tenant cannot pay their rent for whatever reason, or chooses not to, it can be a costly legal battle (whilst simultaneously losing money) to get them to cough up, or to evict them prior to the contacted date. Therefore rent guarantee insurance can be a helpful clause.
However, if you are a trusting person, or you are renting to friends or family, this could be an element of landlord insurance that you choose not to take, erring on the side of trust and mutual agreement, rather than pessimism and distrust.
Home emergency
Home emergency cover is an attractive concept because it means that home emergencies are covered with a 24-hour helpline, should the boiler break down, the electrics fail or something else suitably urgent needs fixing immediately.
If you privately manage your property, home emergency cover can be a life saver, so that you don’t have to call around tradespeople at all hours of the day or night trying to find solutions to emergency situations.
Landlord insurance cost (UK)
The cost of landlord insurance in the UK varies hugely. Depending on the value of the property you own, your mortgage payments, how many properties you own, whether you privately manage or pay a firm, but most significantly the level of protection you choose, all effect the price of the landlord insurance.
Depending on which of the coverage areas mentioned above you choose to buy, and to what level, the cost of the policy will vary drastically. That being said, the cheapest is not necessarily always the best idea, but then again, you must weigh up the odds of something going wrong, whether you could afford to pay out if something did occur, and whether you have income from elsewhere that would cover any rent loss or large pay out.
There is also the chance that, should you own numerous rented properties, insurance providers will come to an agreement on competitive rates, as well giving discounts after extended periods of no claims, as is the norm with most insurances.