What Insurance Do I Need For A Buy To Let?
Buy to let insurance is an essential part of letting a property, and two main aspects will feature in any policy – building insurance and public liability insurance – as well as several added extras.
Even with the most trusting tenants, accidents can happen. Building insurance would safeguard a landlord against the cost of repair or rebuilds of the entire property if it was to be damaged or destroyed by fire, flood, storm, earthquake, explosion, or even violent destruction in a criminal act.
A claim against building insurance does not have to be used solely for a major disaster. Smaller issues such as pipes bursting and damaging the floor, ceiling and bathroom fittings, or a tree falling in a storm and destroying a fence or wall are also examples of justified claims against building insurance.
Public liability protects a landlord against claims from a tenant or another third party injured or has had something damaged due to an issue at the property. More is explained about this clause below.
From here, every buy to let insurance policy will differ, with some offering extra perks as standard, such as glass replacement, lock replacement and boiler cover.
As explained by insurance site NimbleFins, other landlord insurance extras to consider include:
Contents insurance: If a landlord has many items at the property that they would struggle to pay to replace if they were all destroyed, contents insurance may be worth considering. Buy to let contents insurance only covers the items owned by the landlord, and tenants will not be able to claim against this for their own goods. If their contents were damaged or destroyed due to an incident at the property – such as a tree in the grounds falling on their car – they could claim against a landlord’s public liability insurance. As explained above, public liability insurance is standard in any buy to let insurance.
Accidental damage: This covers contents and the building itself if either were to become damaged by accident, such as a football being kicked through a window. Insurers will only honour a claim if it was an accident. Malicious damage would not be covered.
Rent guarantee: This is also referred to as tenant default insurance and means a landlord will be able to claim the cost of any outstanding rent. The average rent paid in the UK is £981 a month, or £839 when excluding London, according to HomeLet figures from January 2021. And if a landlord has a mortgage funded by this rental income, they could have a lot to lose if a tenant stops paying. Rent guarantee can also cover the cost of eviction and the legal process that comes with it.
Loss of rental income: This is different to a rent guarantee as it safeguards against the money lost if a house is inhabitable. One example is if a fire ravaged the home. While repair and rebuild works were being carried out, the loss of rental income would cover the money a landlord would have received if it was still being rented. Again, this is worth considering if a landlord has a mortgage on the property or another financial burden paid for by the rental income.
Legal expenses cover: If a landlord needs to call in for help from legal experts, this clause will cover their costs. If a landlord needs to take legal action against a tenant, or a tenant takes legal action against them, legal expenses cover would meet the costs.
Landlord liability insurance UK
Landlord liability insurance in the UK protects a property owner against potentially costly legal fees and compensation payments if a tenant, tradesperson or visitor was injured at the home they rent. It also covers claims to damaged property as a result of an incident at home.
A third party could have a legal case for negligence by the landlord if they could show they were injured or belongings were damaged as a result of something in the property that was the landlord’s responsibility.
An example could be if a tenant tripped over a badly fitted floorboard and broke their ankle, or a branch from a poorly maintained tree fall onto a tenant’s bicycle, damaging it.
Landlord liability insurance would cover the legal fees, medical bills and compensation.
If a tenant has a legal right to compensation, a landlord may have to cover medical costs and lost income, meaning the claim can quickly escalate into thousands of pounds.
Liability insurance can also protect against damage to their contents if this was due to an issue with the property.
Damage to neighbouring properties can also be included in landlord liability insurance coverage if an incident at the property causes issues in another home. E.g., a fire could cause smoke damage to a neighbouring property.
Buy to let home insurance
Buy to let home insurance is different from the type of policy a homeowner will purchase when living in the home themselves. It covers a much broader range of issues that are tailored to the risks a landlord takes when renting out a property.
While contents insurance is a significant element of home insurance, a landlord may not always feel like a buy must let property because they do not have many items in the property.
The most significant similarity of buy to let and home insurance is the building insurance aspect. Every buys to let policy will include building insurance – protecting the permanent structure of the property, and anything fixed to that structure, is the core part of any policy.
What is the difference between building insurance and landlord insurance?
Building insurance is the main feature of landlord insurance and covers structural damage of the property as well as parts permanently fixed to it. Landlord insurance is a broader umbrella term for a set of coverages that can fall under one policy, such as building insurance, property owners’ liability cover and other coverages.
As mentioned, building insurance is part of any landlord insurance policy, along with liability insurance. However, there are many other safeguards available that can be added to a landlord’s insurance policy. Depending on the insurance provider, these could be standard with their policies or could cost extra.
Building insurance includes some obvious parts of a property such as walls and the roof and some features further from the main building such as fences, gates, patio, yard, driveway, and pavement.
There is also the guttering, pipes, cables, windows and doors. Plus some other items which may not obviously spring to mind – bathroom fixtures, fitted kitchens, tiles, floorboards and fitted wardrobes. Carpets and linoleum flooring are not covered, however, with these items falling under contents insurance.
An insurer will payout for damage to these areas depending on whether they fall into their qualifying reasons. Some policies protect against “all risks”, which is everything except specified exceptions. While others will honour a claim if it falls into one of its “certain risk” categories. These are usually weather or crime-related and include storm, lightning, flooding, earthquake, explosion, fire, theft, riot, or malicious damage.
Sometimes there are grey areas over whether an item in a home falls under buildings or contents insurance. While carpets are not covered by buildings insurance, laminate flooring is because it is permanently glued down and would be difficult to move to another property without damaging it.
But if the laminate flooring clicked in place, it may be regarded as re-usable and so could fall under ‘contents’.
Another test for insurance is if a fixed product, such as a kitchen cabinet, was taken down and then damaged in a fire. It would be considered only temporarily removed and therefore would qualify as buildings insurance. But, if the cabinets were brought in to the house new and were still in their boxes before a fire destroyed them, they are classed as contents. The Financial Ombudsman sets out its stance on what classifies buildings and contents here.