New landlords that are renting out property for the first time may think that all homeowners insurance will cover them for any incident that happens at a rental property. However, if there is an accident, tenant damage or natural disaster, you aren’t necessarily covered by homeowners insurance. It is a rookie mistake.
Homeowners insurance normally only covers owner-occupied homes. As soon as you begin to rent out a property, coverage becomes null and void, and you need to look for landlord insurance.
So do you need insurance as a landlord?
If you are into rental properties, apart from deciding how you should rent out your properties, it’s a really good idea to have insurance. It covers a whole range of problems that could happen in the home and mitigates the risk of renting your property to someone else.
Quite often, mortgage lenders require landlords to have insurance before they can issue an offer, and they may require a certain level of cover as well.
Here are some of the different types of landlord insurance:
This is a really important type of insurance every landlord should have. It covers the bricks and mortar of the property so that major structural or minor structural issues are covered in the event of the problem.
If your property is subject to fire or flood, then it will be the buildings insurance that covers the costs of the building work that comes afterwards. Some buildings insurance will only cover the main property, while others will cover outbuildings as well. So, you need to make sure you get the right insurance.
Contents insurance is sometimes taken out as a stand-alone policy alongside buildings insurance and is sometimes incorporated with buildings insurance as buildings and contents insurance. The level of cover you will need depends on the value of the possessions you have in the property, which will include carpets.
If you are renting furnished spaces, then you will probably need a higher level of contents insurance policy to cover all of the items. A contents insurance policy may cover you for pictures and fittings, carpets, and any items that are lost or stolen during the rental period.
Property owners liability insurance
This type of insurance will protect against any claims that are made by any tenant or visitor to your property that is injured on site. If someone were to trip downstairs or have a bath and tile fall on their head, then it would be this liability insurance that would cover against any compensation payouts.
Rental guarantee and legal expenses
These two are normally sold together, but that’s not always the case. Legal expenses cover any court costs that may be required when you need to take action against a tenant. The rental guarantee cover will cover you for unpaid rent when the tenant either fails to pay or absconds.
Malicious damage cover
If a tenant or anyone else intentionally damage your contents or your building itself, this is the cover that will cover you. You need to report any such damage to the police, and you may need a criminal case number to give to the insurer. In many cases, buildings and contents cover will take care of this, but malicious damage cover can give you peace of mind.
Homeowners insurance versus landlord insurance
At the end of the day, landlord insurance is just another type of homeowner insurance that is purposely built for rental properties. Landlord insurance can cover buildings and contents and provide peace of mind for every landlord and or the tenants themselves as well. The policies are designed to tackle rental specific risks, where tenants will perhaps be less mindful of the state of the property, or may not upkeep as frequently as a homeowner would. You will need to take care of all of your responsibility as the landlord for your insurance to be valid.
It is possible to bulk buy insurance if you have several buy-to-let properties in the portfolio. You can often get a discount when you get two or more properties in a single policy. It can also make it easy to manage as the renewal date will be aligned.
If you have a rental property, it is highly advised that you have rental insurance to protect your investment. It is often a policy for landlords to ask their renters to have buildings and contents insurance as well.