So home insurance policies provide adequate protection for landlords, right? Wrong. Being a landlord involves a lot of responsibility and you’ll need cover that’s not included in a standard homeowner’s policy.
Imagine how you’d feel if your property got damaged and your tenants had to move out. You’d lose rent income but you’d still be liable to pay the mortgage, if you have one. This is why some mortgage companies insist that you have a dedicated landlord insurance policy in place.
Also, most providers offer multi-property landlords' insurance. Rather than covering each home individually, you can have all your properties on one policy and if you buy another property in the future you should be able to add this to your existing policy which means one policy number and one renewal date.
Here’s a run down of the different types of cover you may need which a standard home insurance policy is unlikely to offer:
Buildings and Landlords’ Contents
It’s essential you get the right level of buildings cover, after all a rental property is a major investment. Make sure you work out the correct re-build cost of your property. This is the cost of how much it would be to rebuild your property. It’s not the same as the market value of the property, which is based on the land value and desirability of the location.
To help estimate the rebuild cost of your property use a rebuilding cost calculator like the one supplied by the Building Cost Information Service, commissioned by the Association of British Insurers.
A question that is often asked is, are tenants responsible for their own contents insurance? You’re not responsible for your tenant’s belongings but it’s good to let them know they’ll need to get their own cover. Landlords’ Contents Insurance provides cover for certain appliances such as white goods, furniture and furnishings, belonging to you but for the use of your tenants. This can cover the cost of replacing items that are lost or damaged by fire, flood or theft.
Property Owners’ Liability
This is often the most misunderstood or overlooked cover by new landlords. It provides cover for your legal liabilities in relation to injury to third parties or damage to their property. As a landlord, you would ultimately be liable for injury or damage because it’s your responsibility to make sure that your property is adequately maintained.
The level of liability you need depends on your property's exposure to the public, your tenants and their guests. For example, if your property is in a main high street with a lot of passers by then the risk of injury from a falling roof tile could be greater than a property in the countryside with a lower foot flow.
You might also want to consider Employers’ Liability even if you employ others on a casual basis at your property, such as a cleaner, handyman or gardener. Employers’ Liability provides cover for your legal defence costs and compensation claims should you be sued by an employee (or their representative) for injury, disease or death caused by your negligence as their employer.
Loss of Rent
It’s a good idea to choose a landlord insurance policy that covers loss of rent. This will cover your lost rental income should your tenants be unable to stay at your property after an insured event such as damage from a fire or flood. Some policies also cover the cost of alternative accommodation for your tenants if they have to move out of the property. Check if your policy provides this.
This is not always offered as standard. It provides cover for accidental damage to your property and its fixtures and fittings, for example, if you or your tenants accidentally smash a window or drop something and crack a sink.
Legal Expenses cover is not usually found as a standard policy feature but can be taken out as optional cover. This provides cover for legal costs when taking someone to court for non-payment or equally when someone takes you to court. It covers such things as contract disputes, legal defence, debt recovery and eviction of squatters.
Insurance covers are subject to the individual terms, conditions and exclusions of the insurer providing them. Always review the policy documentation supplied during the quote process to ensure you have the cover you need.
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Lloyds Bank plc Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Telephone: 020 7626 1500.
Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 119278.
Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Please note that due to FSCS and FOS eligibility criteria not all business customers will be covered.