Residential Property Owners Insurance for Buy-to-Let Landlords

Item: Ellis David
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Author: Ellis David

Residential property owners insurance protects landlords against the physical loss of a let property and the legal liabilities that come with owning it. It is not the same as a standard home insurance policy, and most buy-to-let mortgage lenders require it as a condition of the loan.

This guide sets out what it covers, who needs it and the mistakes that most often catch landlords out.

General Information Disclaimer

This article is for information only and does not constitute advice on any particular policy. Insurance cover varies significantly between insurers and between individual policies, and the terms that apply to your property are those set out in your own policy wording. Before relying on anything here, check your wording or speak to a qualified broker who can assess your circumstances. If you would like advice on residential property owners insurance, speak to our team.

Why Standard Home Insurance Is Not Enough

The moment you let a property to tenants, your exposure to risk changes. A standard home insurance policy is written on the assumption that the owner lives in the property, and it is not designed for tenant damage, loss of rental income, or the liability that comes with letting to someone else. Owning and letting property means you are not just maintaining a building, you are running a business, and the insurance needs to reflect that.

Landlord insurance is not a legal requirement in the UK. It is, however, a critical safeguard, and if you have a buy-to-let mortgage your lender will most likely require landlord buildings insurance as a condition of the loan.

What Residential Property Owners Insurance Covers

Residential landlord insurance can be tailored, but most buy-to-let policies are built around the following core covers.

Building insurance protects the physical structure against perils such as fire, flood, storm, subsidence and vandalism. This is usually the core section of the policy and accounts for a large portion of the premium, because it is based on the total rebuild cost of the property rather than its market value.
Landlord's contents covers items you own within the property, along with contents in any common areas, against damage caused by perils such as fire, flood, storm, subsidence or vandalism.
Property owners' liability protects you if a tenant or visitor is injured or their property is damaged as a result of an issue at the property you own.
Loss of rent covers your rental income if the property becomes uninhabitable following an insured event, such as a fire that leaves tenants unable to live there while repairs take place.
Accidental damage covers unintentional damage caused by tenants or their guests, while malicious damage covers damage that is deliberate.
Legal expenses cover provides support for eviction proceedings or disputes with tenants.
Home emergency cover provides assistance for urgent issues such as boiler breakdowns, plumbing problems or security breaches.
Alternative accommodation covers the cost of housing tenants temporarily if the property becomes uninhabitable.

Each of these can normally be added, adjusted or removed depending on the property and how it is let, so a policy for a single let flat can look quite different from one covering a portfolio.

Who Needs Residential Property Owners Insurance

Property ownership happens for all kinds of reasons, and cover can be tailored for each of the following:

Private landlords are individuals who own one or more residential properties and let them to tenants.
Buy-to-let investors purchase property specifically to let it out. If you have a buy-to-let mortgage, your lender will likely require landlord buildings insurance as a condition of the loan.
Retired individuals sometimes rely on rental income as part of their retirement planning.

Whether you let a single property or manage a growing portfolio, the right policy is there to protect your investment and your income, not just the bricks and mortar.

Getting the Rebuild Value Right

One of the most common mistakes landlords make is insuring a property for the wrong amount. The figure that matters for insurance purposes is the declared value, or rebuild value, not the market value of the property.

The rebuild value covers the total cost of rebuilding from scratch in the event of a total loss, including demolition of any remaining structure, removal of debris, structural engineers, architects, contractors and building supplies. This figure almost always differs from what the property would sell for.

If the declared value is set too low, the policy may be subject to the Average Clause, meaning a claim is not paid in full. The insurer pays out a percentage of the claim proportional to the level of underinsurance. For example, if a property is insured for £1,000,000 but the insurer deems its true value to be £1,500,000, it is insured for two-thirds of its actual value. On a claim of £150,000, the insurer would only pay £100,000.

Insurers often apply a Day 1 Uplift to the declared value as an inflationary protection measure, and some issue terms on the basis that the sum insured is index linked, meaning inflation across the policy period is accounted for at claim stage. It is worth reviewing your declared value annually, particularly at renewal, to make sure it still reflects the true cost of rebuilding.

Freeholder and Leaseholder Responsibility

In most circumstances the freeholder is responsible for insuring the property, though a lease may sometimes require the leaseholder to arrange insurance, particularly where liability is concerned. If you own a share of a block rather than a single let property, it is worth reading our guide to block of flats insurance for how buildings cover and communal responsibilities typically work.

Insurance and Selling a Let Property

Having insurance cover in place matters when you come to sell too. A lack of cover, particularly for subsidence or flood, can cause significant delays in the selling process, so keeping a policy current is worth doing even if a sale is some way off.

Residential Property Owners Insurance From Ellis David

Ellis David has arranged property owners insurance for over 50 years, drawing on more than 150 years of combined team experience and access to more than 100 UK insurers and MGAs. We take the time to understand your property, how it is let and your specific requirements before recommending suitable cover, and we remain on hand throughout the year to help with claims or policy adjustments, not just at renewal.

If you are a private landlord, an accidental landlord, a buy-to-let investor or managing a growing portfolio, get in touch with our team to talk through your requirements. You can also meet the people who would be handling your policy before you pick up the phone.

Frequently Asked Questions

Is landlord insurance a legal requirement in the UK?

No. Residential property owners insurance is not a legal requirement, but it is a critical safeguard for anyone letting a property, and most buy-to-let mortgage lenders will require landlord buildings insurance as a condition of the loan.

Can I use standard home insurance for a let property?

No. Standard home insurance is not suitable once a property is let, because it does not account for tenant damage, loss of rental income or the liability that comes with letting to someone else.

What is the Average Clause?

The Average Clause may be applied by insurers when a property is deemed to be underinsured. The insurer pays out a percentage of the claim proportional to the level of underinsurance, rather than paying the claim in full.

How is the rebuild value of a property different from its market value?

The rebuild value is the cost of demolishing and rebuilding the property from scratch, including professional fees and building supplies. It almost always differs from the market value, which reflects what a buyer would pay for the property, including the land.

Who insures a block of flats, the freeholder or the leaseholder?

In most circumstances the freeholder is responsible for insuring the building, although a lease may sometimes place this responsibility, particularly around liability, with the leaseholder instead.

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Residential Property Owners Insurance for Buy-to-Let Landlords

General Information Disclaimer

Why Standard Home Insurance Is Not Enough

What Residential Property Owners Insurance Covers

Who Needs Residential Property Owners Insurance

Getting the Rebuild Value Right

Freeholder and Leaseholder Responsibility

Insurance and Selling a Let Property

Residential Property Owners Insurance From Ellis David

Frequently Asked Questions

Is landlord insurance a legal requirement in the UK?

Can I use standard home insurance for a let property?

What is the Average Clause?

How is the rebuild value of a property different from its market value?

Who insures a block of flats, the freeholder or the leaseholder?

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