Should You Get Landlord Insurance?

If you are a landlord, you have some additional risks to your property that you should cover to protect your investment.

Landlord building and contents insurance usually covers your building against risks from catastrophes, such as fire, storms and other natural disasters. It will usually include cover for the fixtures such as light fittings, carpets, ovens, stovetops and window coverings.

You can also protect yourself from financial loss caused by damage to your rental property by your tenants or their guests, and loss of income due to unpaid rent.

A landlord’s policy will include accidental damage caused by tenants, theft of your property by your tenants, malicious damage caused by tenants, and loss of rent due to tenants leaving without paying.

Do I Need Landlords’ buildings insurance?

Building’s insurance is one of the main types of cover that a landlord will need. It is important because it protects the bricks and mortar of your property. For example, if your property suffers a flood or fire, buildings insurance will cover the rebuilding costs.

This usually includes replacing kitchens units and bathroom suites, while some policies may also cover sheds, garages and other outbuildings.

Before you take out buildings insurance you’ll need to know the rebuild cost of your property.

Do I Need Contents Insurance?

Buildings Insurance will only cover the structure of the building, and therefore not anything that could be dismantled or ripped out and taken away – which includes carpets, curtains, any furniture you provide, and so on. To cover these items, you’ll need to add a Contents Insurance component to your policy.

Even if you’re letting the property unfurnished, there are still likely to be carpets and kitchen appliances – so you might decide that taking out Contents Insurance is appropriate. Or then again, given that there’s a limit to how much it would cost to replace items like carpets and fridges, you might decide that it’s a risk you can afford to take and you’ll just pay out of pocket if anything happens.

It’s worth making clear that a landlord’s Contents Insurance policy doesn’t cover tenants’ possessions. You should make your tenants aware of this, and tell them that they might want to consider taking out their own policy to cover their possessions.
Do I need landlord insurance if renting to family members?

A normal home insurance policy generally won’t be valid if the property is being rented out, even if you’re renting to family members.

You’ll probably need to take out a landlord insurance policy, and for your landlord insurance to be valid you’ll normally need to put a tenancy agreement in place. Also bear in mind that you need to seek approval from your mortgage lender.

If you decide that you don’t need covers like tenant default insurance and legal expenses insurance because you’re renting to family members, you can choose to buy a landlord policy that just includes core covers like buildings insurance and property owners’ liability insurance.

What Does Rental Income in Landlord Insurance Cover?

Rental income protects the amount of money that you receive in rent. If the rental property is uninhabitable due to a disaster claim, the renters will have to live somewhere else and may have additional living expenses. The renter’s insurance policy will take care of them, but they will not be paying you rent for a unit they can not live in. Rental income coverage can take care of you and the value of the lost “rents”.

Do I Need More Liability Coverage Than Homeowners Insurance Typically Provides?

Most homeowners insurance policies limit personal liability coverage to a few hundred thousand dollars. But landlords frequently face lawsuits with damages that amount to much more than that, particularly when negligence is involved. Landlords typically need at least $1 million in liability coverage.

Increasing your overall liability coverage from a couple hundred thousand dollars to $1 million may cost you a few hundred dollars more per year. The immense difference in protection is worth it, however, in that it will provide sufficient coverage for the vast majority of lawsuits and other legal actions.

How much third-party liability coverage should I get for my rental property?

You’ll most likely want to have more third-party liability coverage for your rental property than you would for your own home. You can’t control your tenants or their guests, and if something were to go wrong on your property, you could face a pretty hefty lawsuit. You should also consider a higher third-party liability limit if there’s anything on your rental property that could increase the chances of someone getting hurt (e.g., a swimming pool). Bumping your liability limit to the next level may cost less than you think, so it’s worth pricing out a couple of different options.