Do I need specialist HMO insurance?

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Being a landlord comes with multiple responsibilities. From annual gas safety checks and protecting your tenant’s deposit, there’s a lot to think about, including insurance. To make sure you’ve got appropriate cover for the property you rent out, here’s what you should know about HMO insurance.

What is an HMO?

HMO stands for house in multiple occupation and its official description is:

  • A property with at least three tenants that form more than one household. A household is classed as a single person or people of the same family living together.
  • A property with shared toilet, bathroom or kitchen facilities.

Large HMOs are those with five or more tenants, forming more than one household. If you own a large HMO, you’ll need a licence from the local council.

What is HMO insurance?

HMO insurance takes into account the specific hazards associated with renting a single property to several different households. HMOs are also more likely to have a high turnover of tenants which can increase the risk of damage.

How is HMO insurance different from standard landlord insurance?

HMO insurance is bespoke and will be tailored to the needs of your HMO. Policies will consider the size of your property, the types of people you rent to (for example students who come and go or professionals who may stay longer).

Levels of cover for certain aspects may also be higher to ensure you’re adequately covered (particularly when it comes to public liability).

What does HMO insurance cover?

HMO policies are geared around your needs so no two policies are likely to be the same. Plus, remember that terms and conditions will inevitably vary between insurers so it’s vital that you check you’re happy with what your policy covers.

Typically, HMO insurance includes:

  • Buildings insurance which covers the structure of your HMO and any permanent fixtures and fittings. This includes the walls, floors, drains, pipes, bathroom suites and fitted kitchens.
  • Contents insurance for any moveable items that you supply throughout the HMO and in communal areas. For example, carpets, beds, sofas, wardrobes and any electrical items like a washing machine or dishwasher.
  • Property owners' public liability insurance which covers legal costs and compensation if someone is injured or has their belongings destroyed at your property.

Like other types of insurance, you’ll also be given the option of adding on additional covers, for example:

  • Accidental damage.
  • Malicious damage.
  • Home emergency cover.
  • Loss of rent insurance, which will compensate you if your HMO is uninhabitable because of an event you’re insured for (like a fire or flood).
  • Alternative accommodation, which covers costs if your tenants cannot stay in your HMO because of an insured event.
  • Employers’ liability insurance to compensate anyone you employ if they become sick or are injured through working at your HMO. You must have this by law if you employ anyone in relation to your HMO (for instance, a cleaner or gardener).

How much insurance do I need?

Your buildings insurance should be enough to cover the cost of rebuilding your HMO. You can work this out with your insurer or hire a surveyor to calculate the costs for you. Alternatively, you can use the Buildings Cost and Information Service calculator to estimate the figure for you. It’s a free tool mainly used for domestic properties so if you’ve adapted your HMO, it may not be an accurate measure.

Similarly, contents insurance should be enough to cover the cost of replacing anything you provide. Be careful not to underestimate the items included in your HMO. Underinsurance can result in an even lower payout thanks to a formula called the condition of average; you can find out more in our guide to underinsurance.

When it comes to levels of cover on additional features, these are usually set by the insurer. For example, public liability is often offered at £2 million or £5 million. You can ask for more depending on your needs but it’s likely to mean paying a higher premium.

How much does HMO insurance cost?

Cost really depends on a number of factors and insurers will consider:

  • Where your HMO is, and how many rooms there are.
  • The type of property your HMO is, for instance, is it a shared house or has it been converted into bedsits.
  • The number of tenants you have and the number of households.
  • The type of tenants you rent to, for example, students, professionals, housing benefit claimants.

If you’ve chosen to add on extra features, these will also increase what you pay overall. Don’t forget that while price is important, so too is adequate insurance. Opting for a cheap policy might save you money now, but if it doesn’t include what you need or if the levels of cover are too low, you’ll be left footing the bill. If in doubt, always ask your insurer for their advice.

To help you find the best value for money for all your insurance needs, we’ve teamed up with Quotezone to bring you a wide range of quotes from leading UK insurers.

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