Owning a rental property can be a challenging and rewarding endeavour in equal measure.
The private rental sector within the UK has experienced a boom with 2.8m homes rented privately in 2007, climbing to around 4.5m by 2020. Many factors have fuelled this rise including younger households being unable to get on the market for the first time and the student rental industry thriving.
For an investor, it is a great way to guarantee a second income, acts as an investment for your family’s future and at the same time puts a roof over another family’s head. It is certainly a worthwhile investment as we explored in our article Is Becoming a Landlord Worth the Investment. A property is likely to accrue value over a period of time and can act as a key part of a sensible retirement plan. However, it is also fraught with complications and responsibilities, with many regulations that landlords must follow to ensure their tenant’s safety and wellbeing throughout the period that they reside in the property.
To protect yourself as a landlord it is recommended that you take out landlord insurance during the period of the tenancy. Such policies can help protect you against a range of mishaps and malfunctions serving as a safety net in the event of unforeseen costs and events. Here, we explain the fundamentals of landlord insurance for UK landlords.
Is it a Legal Requirement?
Landlord insurance is not technically a legal requirement in the UK according to Warrington Worldwide. If you have a mortgage on a property, it is highly likely that your lender will require you to have some form of buildings insurance to protect their investment.
Some landlord policies include building insurance as one of the benefits. Do be aware a normal home insurance policy will not necessarily cover you if you are renting to tenants, so if you have a second property that you have previously lived in and you are now looking to use as a private rental property, it’s worth checking the terms and conditions of any existing insurance policy.
Why Do I Need Landlord Insurance?
If you are already covered by a building insurance policy you may ask the question, why you need landlord insurance? Buildings insurance typically offers cover for the structure of the building up to a certain amount, but a comprehensive landlord policy can also protect additional services coming into your home. HomeServe’s comparison guide on landlord insurance details that you can obtain cover for the water and gas supply, plumbing and drainage system and even the boiler. Additionally, landlord insurance tends to offer 24-hour telephone support and emergency call out, and your tenants should be able to deal directly with your provider too, minimising the disruption to you.
Some types of landlord insurance can also cover you against incidents such as a loss of rent, malicious damage or even a vacant property. Policies do tend to vary from provider to provider, so ensure your needs are met by studying what is and what is not included carefully. Typically, landlord liability is an important element to look out for. As an example of what that entails, if a tenant were injured by faulty equipment within the property, they could sue you for damages. Landlord liability cover would protect you to some degree in this instance, possibly covering legal costs and maybe even any settlement.
Landlord insurance is an important addition for anybody who wishes to rent out a property, whether a property developer with multiple locations and numerous tenants, or simply an individual looking to rent out a single house. A good policy can protect you against unforeseen damages, equipment malfunction and surprise occurrences, ensuring your long-term investment does not become a financial burden or liability.