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Landlord Insurance Explained

Insurance: n. Means of protection against an undesirable event, risk, loss or harm

ALL Landlords require INSURANCE for their properties.

From the Landlord who owns a single small flat, to the Entrepreneur who controls a large portfolio of property.

Landlord INSURANCE protects against losing the capital investment and can also help protect the income stream you received from rent


A typical Landlords INSURANCE policy will cover 4 main types of INSURANCE for a single premium

  • Building Insurance
  • Cover for loss of rent in the event of a claim
  • Landlord's Liability
  • Legal Expenses

Additional Insurance can be obtained for

  • Contents Insurance
  • Rent Guarantee
  • Portfolio Insurance
  • Mortgage protection
  • Illness / life

Prices will vary widely as insurance providers calculate the cost of the premium on several factors such as:

  • The location of the properties (postcode)
  • The sum Insured
  • The type of tenants in the property
  • Your history of claims
  • The age of the properties
  • The type of properties (flat, detached, terraced etc.)



Buildings Insurance

A mortgage lender will insist that a property is protected by Buildings INSURANCE. It is the very minimum insurance all properties should have. It usually pays out if the property is damaged or destroyed by fire, floods or subsidence and should include damage to fixed fittings such as baths and kitchens, sheds, greenhouses and garages. If the property is leasehold (such as a flat in a block of flats) the freeholder may have arranged buildings insurance for the whole block, in which case, a separate policy is not needed.


Cover for Loss of Rent In The Event Of A Claim

This INSURANCE only refers to reimbursing the Landlord if the property is rendered unfit to live in and the tenant has had to be housed elsewhere for any reason covered under the Buildings INSURANCE. It will usually pay a percentage of the rent due for the period the property is unfit while repairs are made or until the policy expires. The Landlord is usually able to choose the percentage level from 20% to 100% at a sliding cost scale.


Landlord Liability

A landlord is responsible for the safety of the property that the tenants are living in. This means that should a tenant harm themselves due to something dangerous in the property they can make a claim against the Landlord for damages. For example, a tenant may electrocute themselves on a faulty light switch and badly burn their hand as a result. The Landlord Liability cover will pay for any damages that are awarded to the tenant as well as all legal costs.


Legal Expenses Insurance

This is to protect the Landlords legal rights upon breach of the tenancy agreement. It will cover legal costs over unpaid rent, damage to property and removal of squatters. A Landlord may also incur legal costs as a result of a dispute with the tenant over unauthorised alterations to the property or unauthorised use of the property. Sometimes, costly legal proceedings may be the only way to evict tenants and gain possession of the property once again.


Contents Insurance

Contents INSURANCE is not required by a mortgage lender, however, it is considered essential for a property that is let fully furnished or for an HMO as it financially protects the contents of the property. For a landlord INSURANCE policy, when an insurer talks about insuring contents, they are not talking about the tenants contents. Insuring these is the responsibility of the tenants themselves and can be done through a normal home INSURANCE policy.

The contents that can be insured are items that the Landlord owns in the property but which may become damaged such as carpets, sofas, tables, chairs and pictures. Many insurers also insure communal contents which are situated in communal areas in blocks of flats, or properties with multiple types of tenants. It is possible have contents insurance added to the buildings INSURANCE policy or to have a separate contents INSURANCE policy


Rent Guarantee Insurance

This can be taken out to cover the loss if a tenant can not or will not pay the rent. Even tenants with the best reference sometimes fail to pay their rent due unforeseen circumstances such as redundancy. Rent Guarantee INSURANCE is a relatively inexpensive way to limit the risk of financial loss if rent payments suddenly stop. It will pay out in the event the tenant fails to pay the rent for most reasons they could come up with. It is usual for a policy to pay the rent due up to £10,000 per claim (subject to a maximum of £2,500 per month), minus an excess of one month's rent.

The cover should continue until the tenancy agreement expires, the policy expires or when possession is gained by the Landlord. The Policy usually does not cover a let property until the first months rent and deposit has been paid. In the event of a claim, Insurance Providers will insist that proof of adequate tenant reference checks is provided. The cost of the Rent Guarantee INSURANCE policy will usually differ according to the level of risk the Landord will accept, how long the replacement rental payments are to continue and limitations on legal costs covered.

There are some Companies that offer a fixed cost Policy issued for each new tenancy agreement for around £140 per tenancy.


Portfolio Insurance

It can make good sense for Landlords to take out Property Portfolio INSURANCE as it can bring both simplicity and the financial saving of having one insurance policy to cover their entire portfolio of properties.

While some Landlords choose INSURANCE to match the specific demands of their individual properties, if a larger portfolio is owned it is generally worth having a look at covering them all under one policy as it can give large savings.

Portfolio INSURANCE is based on a number of properties and is subject to the Condition of Average (under insurance). This means that each property insured is subject to Average in that if it is insured for less than the rebuild value of the property, the amount payable will be proportionately reduced. It is advisable to have the properties accurately evaluated by a Chartered Building Surveyor to make sure the INSURANCE is for the correct sum. Also remember that the insurance needs to be for the rebuild value and not the sale price as it often higher than the rebuild value, which will make the premium higher than needed. 

Mortgage Payment Protection Insurance

MPPI INSURANCE will cover mortgage payments if the policy holder becomes unable to work due to an accident, sickness or with some policies if they are made unemployed. The policy that covers all three eventualities is also often called ASU cover. There are a variety of options and all INSURANCE has cover restrictions. A pre-existing medical condition, is likely to exclude a claim for that condition if it reoccurs. Most policies have an initial exclusion period of between 30 and 60 days before a claim can be made and premium payments will continue during the claim.


Life Insurance

Life INSURANCE provides financial protection in the event of an early death where there are dependents that rely on the holders earnings. There are three main types of Life INSURANCE: term insurance, whole life insurance and endowment insurance.

In terms of buying a property most borrowers opt for decreasing term assurance – the sum insured, normally the balance of the mortgage, reduces by a fixed amount each year, decreasing to nil at the end of the term. The premium will normally stay the same and the policies are used to cover a mortgage or other loan given that they pay an outstanding balance of the debt if death occurs.


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