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If you’re a landlord, finding the right insurance is just as important as selecting the right tenants. When it comes to insurance, you probably have a number of questions, which is why we are providing this information here.
What is Landlord Insurance?
Put simply, it is a policy that covers one or more rental properties, whether they are flats, condos, single family residences or even commercial space. It differs from regular property cover in that it can cover conditions that are unique to rental property.
What can I get covered?
Like other types of insurance, it covers damage to your property due to a natural disaster such as a fire, flood, earthquake or tornado. It covers damage to your building, and can also cover damage to your possessions such as tools and lawn equipment needed to maintain your property. It does not cover the personal possessions of your renters, which is why you should encourage them to take out a separate policy that will insure them against losses.
There are some other things a policy might cover, including:
- Liability against claims due to an injury on your property. As a property owner, you are generally liable for accidents that occur on your property, and this type of coverage protects you against injuries that happen to tenants and their guests.
- Legal expenses related to landlord/tenant disputes arising from evictions, contract disputes, or collection of back rent.
- Emergency repairs such as burst pipes or boiler breakdowns that could easily consume several months’ worth of income.
- Damage to your property, whether accidental or malicious. A good policy will cover damages above and beyond the deposit amount up to a given threshold.
- The cost of emergency accommodations in the event you need to relocate tenants elsewhere temporarily because your building is uninhabitable.
- Loss of income in the event you are unable to rent your property due to storm damage or other disaster. This type of coverage will allow you to continue drawing money just as you would if the property were currently being rented.
- Loss of income due to nonpayment of rent. This type of coverage is optional, and is purchased as an add-on feature.
- Employer liability insurance, which might be needed if you hire a team of professionals to oversee the management of your rental properties.
Coverage can be purchased for only one unit, or multiple ones can also be included in the same policy. When buying a multi-unit policy, be sure to read it over carefully so you will know exactly what type of coverage is provided for each property.
Who needs it?
Anyone who is renting his or her property should be certain they are adequately insured. An ordinary homeowner’s policy does not provide sufficient coverage in the event there is a loss to your property. As such, you could find yourself having to foot the entire bill if you were to experience a loss. A standard buildings and contents policy also does not cover you in the event there is a loss of income or for injuries to tenants either.
How much does it cost?
It tends to cost more than traditional homeowner’s policy does, simply because it covers a wider variety of circumstances. It may be tempting to go for the cheapest deal, but as the expression goes ‘buy cheap, pay twice': you are better off speaking to a specialist to ensure you are covered for every eventuality, there is little worse than finding you are not covered after a serious incident such as flooding, malicious damage by tenants or storm damage.
Several things will play a part in how much landlord’s insurance costs, including:
- The geographical location of the property
- Size of the unit(s)
- Value of the property
- Overall condition of your rental units
Insurers will also look at the features of your property when determining how much to charge. You could pay more if your units have a swimming pool, hot tub, or children’s play equipment, since the likelihood of someone becoming injured would be much greater. If you allow pets or smokers, your policy also might cost more. There could be a discount for having certain safety features such as fire sprinklers, burglar alarms or security gates.
Things to Consider When Buying Cover
There are a number of things to think about when choosing the right type of coverage for your rental property. The amount of coverage you choose should depend on the condition of your property and the likelihood of natural disaster in your local area. If you have multiple units, consider public liability cover, since the odds of someone being injured while coming and going is much greater. Likewise, you are also more likely to need loss of income coverage or emergency accommodation coverage if you have multiple tenants as well.
The right cover will protect you and your property in a number of situations. By renting your property to another, you are assuming a great deal of risk, and being responsible for the damages that might occur could be devastating without the right coverage. Protect yourself and your investment today by talking with an insurance broker, who will help you choose the right coverage for your property.