Policies providing landlord insurance cover just may one day help you to avoid a financial disaster.
Here you’ll find answers to some of the FAQs on this subject.
I’m only letting out part of my house. Why can’t I keep using my existing owner-occupier property insurance?
It doesn’t matter whether you’re letting out your entire property or only part of it – once you start obtaining rental income from it you will have legally become a landlord.
Owner-occupier property insurance is not designed to cover the totally different risk profiles associated with the activities of a landlord. As such, any existing cover of that sort will become invalid once you start using your property for income generation.
That’s why you’ll need to change your policy to one providing landlord insurance.
How can the risks be different for a landlord’s property as opposed to one that’s owner-occupied?
There are a huge number of differences between the two sets of risk profiles.
To pick just one – as an owner-occupier you do not have tenants staying in your property who might get injured (or have their property damaged) and claim against you. This should not be seen as a theoretical risk. Landlords regularly have to deal with such claims and particularly in an increasingly litigious society.
There are many other such differences which explain why a separate policy is required.
What sort of things would a landlord policy cover?
Each individual policy will differ in what it provides and it really can’t be stressed strongly enough just how important it is to read the details – and particularly any exclusions.
Typically, you might find:
- cover for your property and contents (if furnished);
- cover against a variety of exposures towards your tenants;
- public liability cover (also important for tenants’ visitors);
- legal fees;
It’s also worth being clear about the typically separate but related areas of cover:
- unoccupied property insurance (for example, if your property is undergoing renovation and has no tenants in place);
- loss of income (if you property is damaged and cannot be let out until repairs are undertaken).
Is this type of policy going to cost more than an owner-occupier policy on the same property?
It’s very difficult to say for sure because a lot depends on your current and potential new policy providers.
Typically, yes, it may be marginally more expensive but there is an important caveat here – it isn’t meaningful to compare the two. That’s because they’re providing two very different types of protection.
It might be possible to say that an orange is cheaper than an apple but that won’t mean much in a real sense if you need an apple for a recipe. So, saying owner-occupier polices “are cheaper” doesn’t mean much either in the context of a landlord’s business.
I keep reading about landlord insurance and mortgages. What’s the link between the two?
If you have any mortgage on your property, whether owner-occupier or buy-to-let, you almost certainly will have signed a contract (loan agreement) that will have included you committing to keeping the property fully insured at all times.
If you fail to maintain that, for example by using an owner-occupier property for rental income purposes without changing your insurance policy, you may be in breach of contract with the mortgage provider. That could be a serious position to be in and one with grave consequences.
How would anyone know what type of policy I have in place?
If you’re applying for a buy-to-let mortgage, the mortgagor may require sight of your property insurance policy before finalising matters. They will know at a glance if you have the wrong sort of policy.
If you live in a part of the UK where formal landlord registration with the local authorities is a requirement, once again, you may need to prove to the officials that you have cover in place that protects your tenants and others visiting them.
Finally, if you need to make a claim on your policy, you can be sure that your insurance provider will undertake certain entirely standard checks and as a result of that, if it transpires that your property is being used for rental income and you only have an owner-occupier policy in place, your claim may be rejected.
It’s not a risk worth taking.