Landlords can get a range of protection, from plain buildings and contents insurance to cover against problems with tenants. You know, small things like not paying their rent or setting fire to the conservatory!
If you get a rental income from a property, you may not be covered under your regular home insurance policy, or the cover may be limited. That's why it usually makes sense to get landlord's insurance, which is also known as buy-to-let insurance.
Basic landlord's insurance covers buildings and contents. Typically it's comparable in price to regular buildings and contents insurance, although with a higher excess. Basic policies protect your investment against damage and theft, rather like regular insurance.
Sainsbury's Bank recently claimed to release the first policy that provides unlimited buildings cover, which means that you don't need to calculate the rebuild cost so you can't accidentally be under-insured. However, if you know the rebuild cost it's worth comparing quotes with other providers.
To calculate the rebuild cost accurately, you should get a surveyor. However, the Association of British Insurers has a rebuild calculator that will help you work out standard rates.
Be careful not to be under-insured, as landlord's insurance (just like regular buildings insurance) is subject to something called 'averaging', which means your rebuild cover is pro-rata'd. Let's say the rebuild cost is £100,000 and you insure the property for £80,000. If the property gets £50,000-worth of damage and you make a claim, you won't get the full £50,000. Instead, the insurer will pay £40,000, and you'll have to pay the rest.
Beyond basic landlord's insurance there are all sorts of optional extras to consider. You can have liability cover, which protects you if tenants suffer as a result of your negligence. You can also get emergency assistance; if the tenant is burgled or has a severe leak in the middle of the night, some insurers will take the call and handle it for you.
Another extra is protection of your rental income. If you have a fire and tenants need to move out for a few months, the policy will cover not just the repairs but also the rent you're missing out on.
You can get rent guarantee cover in case tenants refuse to pay. Alternatively or additionally. you could get legal cover, which covers the costs of taking your tenants to court to evict them or recover rent. Just remember that, a lot of the time, when people stop paying the rent it's because they truly can't afford it, so you may not get your rent anyway.
You can get a policy that covers more than one property, but you should compare both joint and single policies to find which is cheapest for you.
Finally, consider the sorts of tenants you have, as this can affect the premiums. Professionals and families are safe bets, whereas asylum-seekers and multiple occupancies can cost a lot more.
You're not legally required to have landlord's insurance, but, as you can see, it makes a lot of sense for many landlords.
> Compare home and contents insurance through The Fool.