When Sue and Jim decided to move in with their daughter so they could be on hand to help with childcare, they were reluctant to sell their home in case their new living arrangement didn’t work out. They were a bit worried about leaving it empty though, so when they heard their niece Megan was looking for somewhere to rent, it seemed like the perfect solution.

Everything was going great until, after a busy night shift, Megan came home and decided to run a bath. While the tub was filling up, she went downstairs to wait on the sofa where she promptly fell asleep. Megan was woken to the sound of water bringing down part of the living room ceiling. When Sue rang her home insurance provider to make a claim, she was informed they weren’t covered as they didn’t have landlord insurance.

What is landlord insurance?

Landlord insurance is designed to protect you, your property and your tenant(s). Basically, it covers all the same things as standard home insurance, plus various tenant-related issues.

Landlord insurance usually provides as standard:

• Buildings insurance
• Contents insurance - your belongings not those of the tenant(s)
• Property owner’s liability cover – this covers any damage, injury or illness caused by the property that you may be deemed liable for e.g. a tenant tripping down a poorly maintained set of stairs and hurting themselves
• Loss of rent cover – this protects you in the event that your tenants don’t pay their rent or they have to move out after an insured event such as a fire or flood

Optional extras may include:

• Accidental damage cover – this covers accidental damage to the building and its fixtures and fittings e.g. if a tenant accidentally smashes a window
• Emergency assistance cover – this provides help for your tenant(s) in the event of an emergency e.g. if there’s a burst pipe
• Legal cover – this covers your legal expenses e.g. if there’s a contract dispute

Who needs landlord insurance?

You’re not breaking the law if you don’t take out landlord insurance but, if you’re renting your property and something goes wrong, you’re unlikely to be covered by standard home insurance. Also, if you have a mortgage, you’ll probably find your lender will insist on you having landlord insurance before you take on any tenants.

Even if you’re renting to family members, as Sue and Jim discovered to their cost, standard home insurance may not be adequate. The same applies if you’re renting out part of your property, even if you’re still living there too.

What your insurer will want to know:

You’ll be asked what kind of tenant(s) you have. Your answer to this question will impact how much you pay for your insurance. You tend to pay more if you rent to students or those receiving housing benefit. Not every insurer will cover every type of tenant. If you fail to disclose who you’re renting to, you may invalidate your policy.

You’ll also need to confirm that the property is safe. This will mean fitting smoke and carbon monoxide alarms and making sure all gas and electrical equipment meets safety standards. Failing to do this may invalidate your policy. Your tenants could then take you to court and you wouldn’t be able to use the legal cover from your landlord insurance to pay your costs.

Ask an expert

If you’re a new or prospective landlord and you’d like advice on insurance, or any aspect of managing your finances, we’d be delighted to help.

Key takeaways:

• Although landlord insurance isn’t a legal requirement, if you rent out your property and something goes wrong, you’re unlikely to be covered by standard home insurance.
• Most mortgage lenders will insist on landlord insurance.
• You’ll probably need landlord insurance if you’re renting your property in any capacity, even if you’re still living in the property or you’re renting to a family member.
• Your insurer will need to know the type of tenant you’re renting to and you’ll be required to make sure the property meets certain safety standards.
• If you need advice about landlord insurance, ask an expert.