What Does Landlord Insurance Cover?
Like any home or building owner, a landlord should buy insurance to protect their property against loss or damage. But a good landlord insurance policy typically includes additional coverages to protect against specific risks that come with renting a property out to a tenant. This article will aim to explain the four main types of cover you’ll find in a good landlord insurance policy. For more information, see the in-depth landlord insurance guide at NimbleFins.
Landlord building insurance
Landlord building insurance protects in the event a rented property is damaged or destroyed by physical disasters such as fire, flood, theft, explosion or vandalism. Buildings insurance covers things like the walls, roof, doors, windows, wooden or tile flooring, fitted kitchen, baths, plumbing and electrics in a building.
People often say buildings insurance covers what doesn’t fall out if you take a building, flip it upside down and shake it. However, this is not entirely true, because carpets and some laminated floorings are considered “contents” and wouldn’t be covered by buildings insurance.
Landlord building insurance is critical for protecting an expensive-to-replace asset. If a house is burned down in a fire, for example, buildings insurance would pay for the home to be rebuilt. The average cost to rebuild a 1,400 square foot, 3-bed house in the UK is around £208,000 in 2021, up 6% from £197,000 in 2019.
In a sense, landlord building insurance is similar to a homeowner’s building insurance coverage, except that regular homeowner’s insurance will not protect a rented building. Any homeowner who decides to rent out their property needs to switch from a homeowner’s policy to a landlord policy.
Landlord contents insurance
Landlord contents insurance essentially protects the removable items in a building, such as any furniture owned by the landlord in a rental property and furnishings such as curtains and carpets.
Perils covered under contents insurance are similar to those protected by buildings insurance: loss or damage to contents due to events like fire, flood and theft or attempted theft.
Landlords whose rental property is wholly or partially furnished may be keener to pay for contents insurance, to protect all of their furniture in case of disaster. But most unfurnished rentals should be covered by some level of contents insurance if there are carpets and curtains in the property as well.
Contents insurance may also cover damage by tenants if the damage was accidental (e.g., not intentional) and the policy includes an “accidental damage” feature. Oftentimes, accidental damage is sold by insurers as an add-on for which you’ll need to pay an extra premium. Accidental damage can cover events like a tenant spilling red wine on the carpet, however damage by pets is often excluded. Since claiming for accidental damage can impact premiums down the road, landlords may prefer to pay for any accidental damage repairs using a tenant’s deposit rather than claiming on insurance.
Landlord public liability insurance
Landlords also need to hold public liability insurance to protect against a tenant or other visitor to the property being injured and suing. Broadly speaking, public liability insurance protects against third parties’ claims that you are responsible for injury or property damage.
For example, if a tenant trips on a loose carpet fitting and falls, injuring themselves, they could sue you, the property owner.
Public liability insurance covers both legal fees to defend yourself as well as any compensation you’re required to pay to an injured party. With public liability claims commonly surpassing £10,000, this is a type of protection is well worth the money.
Landlord insurance legal cover
A good landlords insurance package should also include legal expenses cover. Legal cover provides access to and pays for legal experts in case of a legal dispute. Suppose a landlord needs to take legal action against a tenant, for example. In that case, legal expenses cover can provide both legal advice and financial assistance to cover legal costs at a critical time. A good policy will provide 24/7 access to dedicated helplines to advise a landlord through an uncertain and stressful situation.
Legal cover can support a landlord with many types of tenant issues, such as eviction, disputes over the terms of tenancy or damage to a property, rent recovery in the event of unpaid rent and more issues. Legal cover can also assist a landlord dealing with contractual disputes with a building contractor over property repairs.
While many types of businesses opt for legal cover, landlords can be especially prone to legal contract issues. Large landlords with access to an experienced legal team and funds to cover evictions or other issues might not need to buy legal expenses cover. Still, it’s typically a sound investment for most small and medium-sized landlords.
Rented property owners might also want to purchase other landlord insurance types such as rent guarantee insurance or loss of rental income cover. In short, “rent guarantee insurance” covers lost rental income if a tenant stops paying, while “loss of rental income” covers lost rental income if a building is damaged (e.g., in a flood) and cannot be rented out.