Home GuidesInsights & Advice Is landlord insurance a legal requirement?

Is landlord insurance a legal requirement?

by John Saunders
16th Jun 21 10:18 am

Landlord insurance is not a legal requirement but it may be a condition of a mortgage or working with a property management company or estate agent when letting a property. According to NimbleFins, while landlord insurance is not stipulated by the law, it is a valuable safeguard to protect property, particularly as tenants are not as diligent and careful as an owner living in a home.

Building insurance is at the core of landlord insurance, protecting the structure of the building against fire, flood, theft, criminal damage and other qualifying issues.

Building insurance covers the structure of the property as well as anything attached to it. This includes pipes and guttering, wires and cables, doors, windows, patios and yards, driveways, pavements, walls, fences and gates. It also covers fixtures attached inside the house, such as baths, kitchen cabinets and worktops, tiles and wooden flooring. Carpets are excluded as they could be reasonably moved to another property, to the Financial Ombudsman states.

The other central element of landlord insurance is property owners’ liability, which covers legal costs and compensation claims if a tenant or other third party is injured in the property or has belongings damaged and the landlord is at fault. Sometimes the landlord isn’t to blame but will still need to defend themselves to fight the claim.

Is it worth getting landlord insurance?

It is worth getting landlord insurance as being without it can be extremely risky. Building insurance alone can save a landlord tens or hundreds of thousands of pounds in case of a disaster like a fire. Insurance providers will analyse the estimated rebuild cost of the home and base a policy price on this evaluation. It means a home can be completely rebuilt at no cost to the landlord should the worst happen. Without insurance, that expense will fall on the landlord.

Property owners’ liability insurance can prevent a landlord from facing hefty legal bills defending against compensation claims if a tenant alleges the landlord is to blame for their injury or damaged property. For example, a tenant could receive an electric shock from dodgy wiring and sue for damages, or a leak could see water damage to a tenant’s computer, which needs replacing and also leaves them unable to work until a new device is sourced.

If a landlord rents a furnished property, contents insurance will cover the cost to replace or repair items it owns if they become damaged. This can be useful if there are expensive or new items such as sofas, especially if bought on finance. But even if the property is not let furnished a landlord usually has some items in the property. These are usually white goods that can be expensive to replace. This contents insurance is only for the landlord’s items and not the tenant’s.

Accidental damage is often considered especially if there is a family with young children living in the property. Windows or fences can easily be broken by footballs, for example, as well as many other accidental incidents, with repair and replacement of damaged property covered by this policy add-on.

Rent guarantee is a lifeline for landlords when tenants do not pay their rent. It reimburses the landlord the rent charged usually for a period of six or 12 months. Rent guarantee can also cover the cost of the eviction process. The UK ban on evictions during the coronavirus pandemic has seen experts predict the number of tenant defaults are set to treble in 2021.

Loss of rental income can be a welcome option for landlords if they cannot rent out their property due to several qualifying reasons that mean the house is uninhabitable. Loss of rental income cover reimburses the landlord with the money they would have charged if the tenant was living there.

Legal expenses cover can also be useful for some landlords if they don’t feel they would be able to cover the cost of representation should they need it. Legal expenses cover helps with contract disputes, eviction, defence against liability claims and other issues.

Do you need landlord insurance for a buy to let mortgage?

Mortgage providers will generally require insurance as part of the terms of their loan.

If a landlord has a mortgage on their property it is worth considering a comprehensive policy if they would struggle with monthly payments or other bills, such as council tax, without rental income.

Tenants can default on their rental payments, or an unforeseen circumstance can stop a landlord from receiving their money. Premium add-ons such as rent guarantee and loss of rental income insurance can be a much-needed lifeline if a property is not habitable or rent payments are missed. Legal expenses cover can also come in handy if a landlord decides to go down the road of eviction or debt recovery.

If profit margins are tight, contents insurance or accidental damage cover can also be wise, so a landlord does not struggle with unexpected costs if the home was trashed, an incident damaged a landlord’s property, or there was a chance incident that wrecked the landlord’s belongings. Just make sure to purchase malicious damage by tenants cover, as this is not usually standard with contents insurance.

Can I get landlord insurance on a residential mortgage?

Landlord insurance can be deemed invalid if taken out for a property with a residential mortgage rather than a buy to let mortgage. Insurance providers all have their own terms and conditions so a landlord would need to read these to check they are not in breach of their contract. Landlords are expected to provide accurate information when taking out a policy as this is what the insurer bases their premium quote on.

Mortgage providers generally also like to be told if a property is being let and may require the mortgage is switched to a buy to let mortgage or give consent to let. The mortgage interest rate may rise as a result of switching. Rental properties have greater risks than homes in which the owner resides. Not telling your mortgage provider could invalidate your mortgage, according to Which?

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