Explaining the Different Types of UK Landlord Insurance


April 22, 2020

Buy-to-let property can be a smart investment that earns landlords passive income over a sustained period of time. But, just like every other type of investment, there are risks involved that need taking into account before making any decisions.

Some of those risks require an examination of current housing trends and are dependent on how the market is performing. As an investor, you don’t have much control over these elements and need to do your due diligence on aspects like local rents and property prices.

Others risks, however, can be mitigated by taking the right steps to protect yourself. Buy-to-let insurance (or Landlord’s insurance, as it’s more commonly known) is the key protector for landlords and typically comes into effect after purchasing a buy-to-let property.

Getting landlords insurance is one of the primary ways that investors can cover themselves against unforeseen circumstances. There is more than one type of cover, however, which may cause some confusion when selecting from the available options.

In this article, we’ll explain the different types of landlords insurance that exist and which ones are most important for investors when letting their buy-to-let property.

 

The different insurance types

There are several types of insurance available to landlords. Some cover is mandatory if you’re buying an investment with a buy-to-let mortgage. Others are optional and offer peace of mind while helping to reduce stress.

Landlords insurance

The most common type of cover for landlords is Landlords Insurance, which typically also includes building insurance. Contents insurance and public liability insurance may also be packaged in with landlords insurance, meaning the three primary cover types are included.

  • Buildings insurance - landlords are covered for damages that could happen to the building, whether it’s the fabric or permanent fixtures and fittings.
  • Contents insurance - items that can be removed from a property are covered in contents insurance. These include carpets, curtains, and furniture if the property is furnished.
  • Public liability insurance - accidents can happen, which is why public liability insurance covers landlords against legal costs and damages for any issues that may arise in their buy-to-let. Cover can be for as much as £5 million.

 

Tenant default insurance

Unforeseen circumstances could arise that might see your tenant unable to pay the rent, either through the loss of employment of something else. Tenant default insurance can provide peace of mind and allow landlords to claim back the rent if their tenant hasn’t paid for two or more consecutive months.

Rent guarantee insurance

In the event that your property is damaged through circumstances such as a fire or flooding, rent guarantee insurance will cover you for loss of income. It pays out while the property is uninhabitable so that you don’t lose out on your rental payments.

Accidental damage insurance

handyman replacing a door

If a tenant causes damage around the property, such as spilling wine on the sofa, accidental damage provides the relevant cover. It can also protect landlords against outdoor damage like broken windows or doors. There is usually more than one type of accidental damage insurance, with landlords able to tailor the cover to their needs.

Legal expense insurance

Legal expense insurance can provide landlords with cover if they need to take action against a tenant. Eviction fees and court costs are often covered to the sum of around £50,000 for landlords taking out legal expense insurance.

Alternative accommodation insurance

If for any reason you need to re-house the tenant during a tenancy, alternative accommodation insurance covers landlords, so they’re not out of pocket. However, it only pays out if you are forced to re-house the tenant because the property has become uninhabitable.

Landlord home emergency insurance

At times, maintenance issues might crop up around your buy-to-let property while a tenant is in situ. Landlord home emergency insurance offers 24/7 repairs to help with pressing issues like plumbing, drainage, heating, and power. It’s also common for boiler cover to be included.

Unoccupied property insurance

Landlords looking for extra peace of mind might opt for unoccupied property insurance, which can provide cover when the property enters a void period. There will be regular checks during the process to make sure landlords continue to qualify for the cover.

 

How to find the best insurance quotes

Once deciding on the type of insurance needed for cover, landlords will need to find the best offers available. There are many insurance companies to choose from in the UK, each one competing to offer their services.

Comparison websites are the best place to start, as landlords can enter their requirements and see results tailored to their needs. Using a comparison website provides a strong overview of available options, and includes finer details like excess and the amount of coverage included.

Some of the most popular comparison websites can be found at:

 

However, not all insurance companies operate on comparison websites. That’s why it’s worth searching for the type of cover needed and enquiring with some insurance companies directly. Using a combination of comparison websites and your own research should provide the best results available.

 

Insurance jargon explained

There are so many types of insurance options available, and many of them come with industry language that can be confusing for first-time landlords who are new to the world of buy-to-let properties.

Here are some of the keywords landlords might come across while arranging insurance:

  • Add ons - extra level of cover which landlords may or may not choose to include in their insurance
  • Addendum - a document that sets out agreed changes to an insurance contract. Addendums are also common in changes to tenancy agreements
  • Additional premium - a further premium that is payable as the result of a document change where there may be an increased risk
  • Broker - an independent intermediary who sells policies from different insurance companies
  • Certificate - the document that proves the insurance is valid
  • Cooling-off period - the amount of time a landlord has to cancel their insurance after initially taking it out
  • Excess - this is the amount landlords pay from their own pocket before making a claim
  • Good state of repair - the current state of the landlord’s property, which may have a bearing on the type of insurance they can choose
  • Landslip - detailing a type of ground movement that can be caused by natural disasters or the moving of the ground
  • Loss - another term for making a claim
  • Loss adjuster - used by insurance companies to carry out investigations for complex losses
  • No claims bonus - not as familiar with landlord insurance, though still relevant in some cases, no claims is the length of time a policyholder holder goes without making a claim
  • Ombudsman - an independent person hired to look into complaints and claims
  • Peril - a specific risk or cause of loss covered by an insurance policy. This includes fire, flood or theft
  • Period of risk - the period when the insurer can incur liability under the terms of the policy
  • Policy - a document provided by the insurer which details the terms and conditions of the contract
  • Policyholder - the person who is taking out insurance cover
  • Portfolio - referring to a landlord’s potential collection of buy-to-let properties
  • Ombudsman - an independent person hired to look into complaints and claim

 

What happens if landlords don’t get insurance?

While a landlord's insurance tends to be mandatory, other types of cover are optional. Some landlords like to safeguard themselves against unforeseen circumstances by equipping themselves with comprehensive cover that protects them against elements like loss of rent.

Other landlords are happy knowing they have basic cover for their building in place that protects them against damages. Essentially, each landlord makes their own decision based on what they believe is most important to their circumstances.

However, if problems were to arise, and a landlord wasn’t insured, they would be liable for solving the issues without any help. Such a scenario would often require them to pay for damages out of their own pocket, which could prove to be costly and interrupt their passive rental income earnings.

 

Minimising stress with Blueground

stylish dining area with mirror and modern furniture

Blueground takes the hassle out of finding tenants by renting the property from landlords directly. With Blueground acting as your primary tenant, you don’t need to ever worry about referencing, contracts or ensuring that your home is move-in ready. We take care of absolutely everything. Instead, spend your time in a more productive way, such as figuring out the type of landlord insurance you’ll need to have on your UK property while enjoying your passive rental income, from anywhere in the world.


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