Landlord Insurance: What You Actually Need (And What You Do Not)

The day a tenant moves in, an ordinary home insurance policy usually stops covering the property.

Not reduces cover. Stops. Most residential policies exclude properties let to tenants, and an insurer that discovers the property was let will typically decline the claim and may void the policy from the start.

That is the single most expensive misunderstanding in this article, and it costs nothing to fix.

What landlord insurance actually is

Not one product. A bundle, and you choose which parts you want.

The two that are not optional

Buildings. Rebuild cost, not market value - they are different numbers and it is the rebuild figure that matters. Underinsure and many policies apply average: insure for 70% of the correct value and the insurer may pay 70% of any claim, even a small one.

Property owner's liability. A loose stair rail, a paving slab, a faulty electrical fitting. Claims here are rare and occasionally very large. Cover is usually inexpensive because it is rare - which is exactly the shape of risk insurance exists for.

Rent guarantee - read this before buying it

It sounds like the answer to every landlord's worst month. In practice it is heavily conditional, and the conditions are where the value is lost.

Common requirements:

• The tenant must have passed specific referencing - often the insurer's own, or to a stated standard
• You must have a written tenancy agreement
• The deposit must have been properly protected where a scheme applies
• You must notify the insurer within a short window of the first missed payment - sometimes 30 days
• Cover often has an excess period and a cap on months paid

Miss the referencing standard or the notification window and the policy pays nothing. That makes it a genuinely useful product for a landlord with disciplined screening and record-keeping, and close to worthless for one without.

Which is worth being blunt about: the policy is only as good as your process. If you cannot show when rent was due and when it stopped arriving, you cannot make the claim. See How to Screen a Tenant and Landlord Record Keeping.

The exclusions that void claims

Almost every declined landlord claim traces back to one of these.

Not telling the insurer it is let

The big one. If circumstances change - you move out and let your former home - you must tell them.

Unoccupancy clauses

Most policies restrict cover once a property is empty beyond a stated period, commonly 30 to 60 days. Cover for escape of water, theft and malicious damage often falls away first. If you have a long void, tell the insurer rather than hoping.

Letting to a category the policy excludes

Students, tenants on housing benefit, sharers, short-term or holiday lets. Some policies exclude these outright. Letting to an excluded category without disclosure can void the whole policy.

Missing safety certificates

Some policies make cover conditional on holding current gas and electrical safety records. An expired certificate can become a reason to decline.

Poor maintenance

Damage that developed gradually - long-term damp, a slow leak, a roof left in disrepair - is usually excluded as wear rather than a sudden insured event.

How to buy it sensibly

1. Get the rebuild cost right. A surveyor's figure, or your lender's valuation, not the purchase price
2. Declare everything. Property type, tenant type, whether it is furnished, any period it will be empty. Non-disclosure is the cheapest way to have a claim refused
3. Compare excesses, not just premiums. A cheaper policy with a 1,000 excess is not cheaper on a 1,400 claim
4. Check the unoccupancy period and diarise it against your void periods
5. Insure per property, or as a portfolio - multi-property policies are usually cheaper past three or four units and renew on one date

What it costs, and where it lands

In the worked example used throughout this blog we carry 420 a year for landlord insurance on a single property. That is a realistic mid-range figure for buildings plus liability on an unfurnished let, and it is a direct deduction from net yield - part of what takes a 9.3% headline down to 6.8%.

Worth remembering when comparing policies: the difference between a 420 policy and a 300 one is 120 a year. The difference between a valid claim and a voided one can be the building.

Frequently asked questions

Is landlord insurance legally required?

Buildings cover is usually required by your mortgage lender rather than by law. Liability cover is rarely mandatory and is the one most professionals would not go without.

Can I ask the tenant to insure the property?

No. Tenants insure their own possessions. The structure and your liability are yours, and a tenant's contents policy covers neither.

Is the premium tax deductible?

Landlord insurance premiums are generally an allowable expense against rental income. See Rental Property Expenses You Can Claim.

Does it cover damage caused by the tenant?

Malicious damage cover is sometimes included and often optional, usually with conditions and an excess. Ordinary wear is never covered - that is what the deposit and the inventory are for. See The Inventory Report.

What happens if I have a long void?

Notify the insurer before you pass the unoccupancy limit. They may add conditions - inspections, draining the system - but conditions you can meet are better than cover you have quietly lost.

Put the premium where you can see it

Insurance is one of the costs that separates a headline yield from a real one, and it is easy to forget between annual renewals.

The Rental Property Tracker has insurance as a built-in expense category and carries it into the net yield and cash flow figures automatically, per property. $27 once.

To see what a change in premium does to your return, use the free Rental Yield & Cash Flow Calculator.

General information for landlords, not insurance, legal or financial advice, and not a recommendation of any product or insurer. Policy terms, exclusions, unoccupancy limits and legal requirements differ substantially between countries and between insurers, and change over time. Read the policy wording and speak to a qualified broker before buying cover.