Do I Need Landlord Insurance If Renting Out Property?

Caeva O'Callaghan | May 13th, 2020

Specialist landlords’ insurance will help cover you for the unique risks landlords face. But how is it different to normal home insurance? Read on to find out more.

You need specialist landlords’ insurance if you want tenants to pay to live in a property you own. Landlords’ insurance isn’t compulsory, however some lenders won’t give you a buy-to-let mortgage if you don’t have landlords’ insurance in place.

On top of that, specialist landlords’ insurance will give you a number of useful protections. These may include buildings cover, accidental damage and financial protection against loss of rent. Put simply, it’s a good thing to have.

In this article, we’ll cover:

• Do I need landlords’ insurance?
• What’s the difference between home insurance and landlords’ insurance?
• What does landlords’ insurance cover?

When you rent out a property you own, you need to have insurance in place to cover any loss or damage. If you don’t, you may end up paying out of pocket.

What is landlords’ insurance?

When you let out a property, it’s important not to underestimate the risks involved. Having someone else live in a property you own poses risks that normal home insurance won’t cover. Many landlords decide to rely on normal house insurance, but these policies aren’t what you need.

If you buy a property with the specific intention of renting it out, you’ll need a buy-to-let mortgage. Many lenders will not give you one unless you have landlords’ insurance, which covers a landlord from financial losses connected with the rental property.

Landlords’ insurance covers you for the basic home insurance risks, as well as others only landlords face. These could include key loss, accidental damage cover and third party liability.

For example, landlords’ insurance will typically include:

AA Landlord Insurance includes cover for the following;

• Cover for third party claims
• Rehousing tenants or paying for lost rent after an event like a flood or fire
• Fire brigade charges
• Door lock replacement
• Contents in the outbuildings
• Contents in the garden
• Escape of water

Do I need landlords’ insurance?

Yes, if you’re a landlord. But in any specific situation, it’s not always easy to tell you are one. It all depends if you have a lodger or a tenant living in your property.

If you have a lodger living with you, you are not a landlord and don’t need landlords’ insurance. However, this means your lodger doesn’t have as many rights as a tenant, and you as a landlord aren’t covered for as many risks.

It’s important to note that not all insurance companies want to insure properties that are let out. It is important to disclose the home will be rented out at the quotation stage. Who you rent to will also affect your premium. For example, a couple or a family are less of a risk than a house rented out to students, who may engage in more activities that increase the risk of a fire such as lighting candles and smoking.

Also, if your tenants move out and the home is vacant, you must let your insurance company know.

Lodgers vs tenants

A lodger (legally called a ‘licensee’) is someone who lives in the same property as you. You’ll generally share the same roof, and the same facilities. For example, if you rent out a room and share a kitchen or bathroom with this person, you have a lodger, even if they pay you rent.

However, under the Residential Tenancies Act, a lodger becomes a tenant if they have sole access to the property and the right to enter. If you have a granny flat you’re letting out, even if the flat is technically part of your house, you’ll have a tenant only if the flat has its own kitchen and bathroom facilities, entrance and exit.

Plainly speaking, if you could live your lives as normal and go three months without seeing each other, you have a tenant and not a lodger.

And if you have a tenant, you will need landlord’s insurance. At its most basic, this will cover the buildings and structure you rent out from hazards like fire or flood. However, you may not need contents insurance, unless you’re letting out your house or flat as furnished.

A good general rule is that anything not nailed down belongs to the tenant, and is their responsibility to insure. Kitchens and bathrooms, doors and windows and floors all count as buildings, and as such are your responsibility to insure.

Keep in mind

Even if you have a lodger and not a tenant, you will have to tell your home insurance. Unfortunately, many providers exclude theft cover if you have a lodger staying with you. The good news is, many don’t. But if you don’t tell your insurance provider about your lodger, your cover may be invalidated. This is why it is good to talk to your broker who can advise which providers cover lodgers and which ones do not.

Another condition you must comply with is the Housing (standards for rented houses) Regulations 2008 and subsequent amendments. This means you must ensure the house contains a fire blanket, fire extinguishers and either a mains-wired smoke alarm or at least two 10 year self-contained battery-operated smoke alarms.

Lastly, you will also want to consider adding liability insurance to your policy. If your lodger injures themselves while in your home, they can take legal action against you. Avoid this scenario at all costs.