Do I need landlord insurance, or will home insurance do?

Why home insurance fails

A standard residential policy is priced on the assumption that the owner lives there. Letting changes the risk in ways insurers care about: longer periods when nobody is present, different occupancy patterns, and liability towards people who are not your household.

The consequence is not that the policy costs more. It is that the policy may not respond at all. An insurer that discovers the property was let without disclosure can refuse the claim and cancel the policy, and that judgement usually arrives after a fire, a flood or an escape of water, when the bill is largest.

Notifying the insurer is a five minute phone call and it is the entire fix.

What landlord insurance covers

• Buildings. The structure itself, which is what the mortgage lender requires. Rebuilding cost, not market value.
• Contents you supplied. Carpets, white goods, furniture in a furnished let. Not the tenant's belongings.
• Property owner liability. Claims by a tenant or visitor injured because of the property. This is the cover most people underrate and the one with the largest tail.
• Loss of rent where the property becomes uninhabitable after an insured event. Different from rent guarantee, below.
• Alternative accommodation for the tenant in the same circumstances.

Optional extras usually include accidental damage, home emergency cover and legal expenses. Whether they are worth it depends on how much of your management you have delegated and to whom.

Three products people confuse

These are separate things and being clear about which is which saves money and disappointment.

• Landlord insurance covers the property, the contents you supplied, and your liability.
• Rent guarantee insurance pays when a tenant stops paying. It is not part of a standard landlord policy, it usually requires the tenant to have passed specified referencing, and it often has a maximum claim period. Some agencies bundle a version of it, and Northwood's guaranteed rent product across several cities we rank is a contractual arrangement rather than an insurance policy, which the agency itself is careful to say.
• Client money protection is nothing to do with you buying cover. It is compulsory insurance held by your letting agent, protecting rent and deposits the agency holds on your behalf if it misappropriates them or fails.

Who else needs telling

1. Your mortgage lender. Letting without consent breaches the mortgage terms.
2. The freeholder or factor, if the property is leasehold or in a block. Many leases restrict letting, and some prohibit short term letting entirely.
3. Your insurer, both when you start letting and when the letting type changes. A property let to a single family and the same property let room by room are different risks.

All three appear in the pre-letting stage of our landlord checklist for the same reason: each one can invalidate something you are relying on.

What to check on the policy

• Is the sum insured a rebuild cost rather than what the property would sell for?
• Does it cover the letting type you actually have, including student lets or a licensed house in multiple occupation?
• What are the unoccupancy terms? Many policies restrict cover after a set number of consecutive empty days, which matters between tenancies.
• What is the liability limit?
• Does it require specific security, tenant referencing or inspection frequency as a condition?

That last point is the one that catches people. A policy requiring quarterly inspections is a policy that expects them to happen, which is worth checking against what your agent actually includes in its fee.