If you have any doubt as to whether or not you require landlord insurance cover, some of the points below may assist your assessment and decision.
What is a landlord?
Broadly speaking, the moment you use your property for the purposes of generating rental income, you have become a landlord.
That basic principle typically applies in situations as diverse as:
- you own a small commercial unit you have let out to someone to run their business from;
- your normal place of residence has a small separate self-contained unit within it and you let that out to students;
- a bedroom in your property is used by someone as a lodger;
- you own a property which is let out in its entirety to tenants.
Although there may be some minor points of distinction in some relatively unusual cases, by and large, once a third party starts to pay you for the use of property you own then you have crossed the line and become a landlord.
How this might affect you
Becoming a landlord might affect you in a number of areas:
- the rental income component will mean that you may have tax liabilities to HMRC;
- depending upon which of the home countries of the UK you live in, it may be mandatory for you to register your activity with a central authority. In England, that might be your local government offices;
- you will need to review carefully your insurance arrangements;
- in situations where you have an owner-occupier mortgage on a property you are using for the purposes of generating rental income, you may also need to seek the permission of your mortgage provider.
Specific insurance implications
Perhaps the most important point to communicate is that once you become a landlord, you will typically need specialist landlord insurance. Any existing owner-occupier insurance you might have in place will typically be insufficient and any claims you might make under it might be rejected.
The reason you may need a specific landlord insurance policy arises from the fact that insurers typically regard a property with tenants in it as constituting a significantly different risk profile to one that is owner-occupied. They are therefore keen to ensure that a policy is in place providing appropriate cover for the risk profile involved.
It is worth noting that this isn’t simply a question of replacing an owner-occupier policy with an identical one that happens to be branded “landlord insurance”. There are differences in the cover provided, with a landlord policy typically offering a greater degree of business-related protection than will be the case with owner-occupier policies.
There may be variations between different policies and a detailed reading of a policy is advisable before you decide to purchase it. However, some policies designed for landlords might include:
- enhanced public liability cover (typically necessary due to the higher risks of having tenants and their visitors in your property);
- loss of income cover (where it arises as a result of an insured risk);
- employers’ liability insurance cover (in qualifying situations where it is required).
If you are a landlord, it is important not to discover the need for the correct form of landlord insurance for the first time in the context of a problem resulting in you needing to make a claim.
If you are in any doubt as to what cover is required for your particular property, it will be highly advisable to take advice as soon as possible.