What insurance do I need for my let property?

If you are investing in buy to let property for the first time, you might be unaware of the importance of landlord insurance.

If you are an “accidental” landlord – one who has unexpectedly inherited property or own a home that you have been unable to sell and instead decide to let – the notion of let property insurance may be more unfamiliar still.

The number of these accidental landlords is steadily growing. An article in the Times newspaper on the 10th of May 2018, indicated that their number has grown by 230,000 in the past two years – whereas the number of buy to let investors making the conscious decision of running such a business has fallen by 88,000 in the same period.

So, whether you have bought or have inherited a buy to let property and are a first time investor or an accidental landlord, the following explains what insurance you need for your let property – and why that needs to be let property insurance.

Let property insurance

Standard property insurance – such as the home insurance arranged by an owner occupier – is specifically designed for owners who reside in the property. Let property insurance – also known as landlord insurance – on the other hand is specifically designed for owners who earn an income from letting the property to tenants. The latter is a business. The risks are qualitatively different, and this distinguishes let property insurance from regular home insurance.

Although there are many variations on the nature and extent of cover offered by different let property insurance policies, each typically safeguards a buy to let business against the following types of risk:

Building insurance

  • any let property represents a significant capital value;
  • the structure and fabric of the property therefore needs the protection of suitable building insurance against such potentially serious threats as fire, storm damage, flooding, impacts, explosions, vandalism and theft;
  • typically, the total buildings sum insured is equivalent to the cost of completely clearing the site and reconstructing the premises in the event of a catastrophic accident resulting in its total loss;
  • any mortgage lender with an interest in the property is almost certain to insist that adequate buildings insurance is maintained at all times throughout the mortgage term;

Contents insurance

  • since most landlords are likely to own at least some items within any let property – even if it is only carpets and curtains, for example – contents insurance may be required to safeguard these against loss or damage;

Landlord liability insurance

  • as the owner and landlord, you also have a duty of care to prevent injury or property damage suffered by your tenants, their visitors, neighbours, and members of the public;
  • if an injury or property damage is suffered, you may be held responsible for a breach of that duty of care and ordered to pay substantial compensation;
  • the landlord liability insurance, typically incorporated into let property insurance, indemnifies you against such claims – with some insurers offering as much as £2 million indemnity as standard, and an option to increase this to £5 million;

Compensation for loss of rental income

  • recognising that your buy to let property is a business, some policies typically offer an option to include loss of rent cover. This is compensation for loss of rental income following an insured event that leaves the premises temporarily unlettable, pending repairs and reinstatement;
  • there are limits on the amount of compensation that may be claimed, of course, and the maximum is generally expressed as a percentage of the total sum insured.

If you own property that is let to tenants, therefore, the insurance you need is let property insurance. If you continue under the mistaken impression that you are sufficiently covered by retaining standard home insurance for such a let property, you are likely to be in for a rude awakening if you make a claim and it is subsequently refused because you hold inappropriate cover.