Do you need home insurance for a rental property?

You do not need home insurance for a rental property, but you do need landlord insurance. Landlord insurance is not legally required but it is extremely prudent to take out a policy. You are wasting your money if you have a rental property with regular home insurance as letting the property will usually deem a home insurance invalid (that is, home insurance policies don't usually extend coverage to properties that are rented out).

Instead of 'home insurance', landlords buy 'landlord insurance'.

There are many more dangers when renting a property compared to when living in the property yourself. That’s why landlord insurance premiums are often more expensive than home insurance. But it also means they are more comprehensive and cover many issues that would never be a threat when living in a home you own yourself.

What happens if your tenant fails to pay their rent? Or they sue you for failing to fix an issue which causes them an injury? Home insurance does not cover these dangers, but landlord insurance does have special clauses and add-ons which safeguards against these pitfalls.

Is landlord insurance the same as building insurance?

Landlord insurance includes building insurance as standard so the structure of the property and its permanent fixtures will always be protected. Landlord insurance will pay for the cost to repair or replace items or structures damaged or destroyed in a covered event like a fire, flood or burglary. Insurers will base their quote on an assessment of the cost to completely rebuild the property if it was destroyed.

If the property is leasehold then building insurance should also be held by the freeholder. Should the property be destroyed, for example by fire or explosion, then that claim would need to be made through the freeholder’s insurance. But the leaseholder can claim on their own building insurance for damage to the fixtures inside the property, such as burst pipes or a door broken by a burglar.

Building insurance will cover damage to the structure of the building or anything permanently attached to it, such as cables, pipes, walls, gates, doors, windows, fitted kitchens, bathrooms, fitted wardrobes, wooden or tiled floors and walls. However, it does not cover items like carpets, curtains and free-standing fridges. These would be covered under contents insurance. If the item can be “reasonably removed” and used in another home it will fall under contents insurance, as per guidance set out by the Financial Ombudsman which arbitrates over disputes.

What is the difference between home insurance and landlord insurance?

Home insurance and landlord insurance do cover some of the same policies, but landlord insurance is much more extensive when it comes to considering risks with letting a property. And most home insurance policies don't cover a property that is rented out.

Home insurance and landlord insurance will both cover building insurance as standard, and contents insurance as well although this typically is charged an extra premium. Both landlords and owner-occupiers can also get accidental damage cover although this may be an add-on, as well as alternative accommodation cover and legal costs as additional extras.

Landlord insurance also offers some supplementary coverage:

Landlord liability insurance comes as standard in most landlord insurance policies. This pays legal expenses and damages related to claims from tenants or other third parties legally allowed on the property who allege the landlord is to blame for an injury sustained, or damage to belongings.

Landlord liability example: A loose branch from an overhanging tree that the tenant has informed the landlord of falls onto their car. They sue for damages to replace the car.

Landlord liability example: A tenant trips over a loose floorboard and breaks their leg. They sue the landlord for compensation after having to take time off work and for their medical bills.

Rent guarantee insurance is an additional extra to landlord insurance which covers the cost of the chargeable rent if a tenant defaults. It is usually covered for six or 12 months depending on the policy. It’s useful for landlords with mortgages.

Loss of rental income insurance is different to rent guarantee as it covers a landlord’s income if the property is uninhabitable.

Loss of rental income example: A flood rips through the ground floor of a property and tenants must move out. Loss of rental income insurance would reimburse the landlord the rent it would have received if tenants were living there, until repairs are made and the property is rented again.

Contents insurance is sometimes requested by landlords who let properties furnished, but also those renting unfurnished as they will undoubtedly still include some of their belongings such as washing machine and fridge. While malicious damage is deemed a qualifying incident where insurance would be paid, malicious damage by tenants is a common exclusion. This would require an additional malicious damage by tenants cover.

More information on all aspects of landlord insurance can be found here.

Do you need landlord insurance and home insurance?

You do not need both landlord insurance and home insurance. You need one or the other depending on whether you are living in the property yourself or renting it out to tenants.

If you are letting the property you need landlord insurance and you will also need to tell your mortgage provider which may require you to switch to a buy to let mortgage.

Is home insurance tax deductible for rental property?

Insurance is tax deductible for a rental property. It is an allowable expense as stated by the government. However, if letting out a property a landlord must make sure they have the correct insurance. Home insurance will not be valid for a rental property and instead landlord insurance is needed.