Do you need home insurance for a rental property?

Home insurance is not needed for a rental property, but landlord insurance is strongly advised. Home insurance does not cover all the potential risks that come with letting a property and will not typically be valid if the property is rented to tenants. 

A specialist product has been created for landlords. Much like home insurance, landlord insurance offers protection against damage to the building. But it also provides cover against risks such as liability if a tenant was injured or had property damaged and blames the landlord. There are additional extras that can be purchased such as rent guarantee and loss of rental income, which according to insurance experts NimbleFins is particularly important if alternative accommodation is not covered in a policy.

Is landlord insurance the same as building insurance?

No. Landlord insurance nearly always includes building insurance as a core component to cover the cost to repair or replace damage to the property and items fixed to it in case of a covered event. But regular building insurance is not suitable for landlords as renting a property out may invalidate a non-landlord-specific building insurance policy. And landlord insurance can cover a lot more than just building insurance.

Typically building insurance covers parts including walls, gates, fences, windows, doors, pavements, driveways, pipes, guttering, cables and the building structure itself. It also covers fitted items inside the house such as kitchens, bathrooms, wood flooring and tiles. But not carpets and curtains. 

The Financial Ombudsman has set out the definition of what is covered under building insurance, writing: “Buildings insurance covers the structure of the building, plus permanent ‘fixtures and fittings’ such as baths, fitted kitchens etc. 

“The test is – can it reasonably be removed and taken to another home? If it can, then it is part of the ‘contents’ and it will not generally be covered by a buildings policy. Buildings policies usually include outbuildings – garages, garden sheds etc.”

If the property is owned under a leasehold agreement, the freeholder will have buildings insurance too to cover the external structure of the building. But the leaseholder’s landlord building insurance will cover the internal items in the property such as permanent fixtures and fittings. 

Building insurance in a landlord policy also sometimes covers alternative accommodation for tenants if the property is no longer habitable due to a qualifying incident such as a flood. 

Building insurance is the core element of landlord insurance, along with landlord liability insurance.

What is the difference between home insurance and landlord insurance?

Home insurance and landlord insurance cover a lot of the same issues but if the wrong policy is in place it is probably invalid. There is a bigger risk of a claim when renting to tenants, and so insurers expect to be informed and may understandably charge more for landlord insurance. Landlord insurance is more extensive, covering many specific issues that are not a threat when a homeowner is living in the property themselves. 

While both policies include building insurance, a homeowner living in a property would never need landlord liability insurance. If a tenant or other third party lawfully allowed at the property should injure themselves or have property damaged down to an alleged fault with the home, they can sue the landlord for compensation. For example, a dilapidated wall falls on a tenant’s expensive new garden furniture, or worse hits their child. Landlord liability insurance covers the legal costs and any damages awarded if it is found the property owner’s negligence led to the incident.

Building and liability insurance usually come as standard for any landlord policy. Some landlords also choose to add contents insurance to their premium. While this is standard for home insurance, contents coverage is not automatically included in many landlord policies. Many homes are let unfurnished but some landlords still choose contents insurance as there will inevitably be some white goods in the home, and carpets and curtains fall under contents and not building insurance. 

Rent guarantee – which covers the rent if a tenant defaults – and loss of rental income insurance – which pays landlords the chargeable rent if the property is uninhabitable and a tenant must move out – are also additional extras available in landlord insurance packages.

Both home and landlord insurance offer accidental damage and legal cover, usually as optional extras.

Landlord insurance is usually more expensive than home insurance because there are bigger dangers involved. Tenants are generally less careful than homeowners and are less likely to act upon issues spotted within the home. Many additional extras to a policy, such as rent guarantee and malicious damage by tenants, would also never be needed by a homeowner so the insurer is taking on more risks. 

Do you need landlord insurance and home insurance?

A property owner needs either landlord insurance or home insurance, not both. If the owner lives in the home then home insurance is the correct package. But if the home is let out to tenants then landlord insurance must be secured instead. Home insurance will usually become invalid if it is in place when letting to tenants. 

Is home insurance tax deductible for rental property?

Insurance is tax deductible for a rental property as it is a business expense. As long as an expense is “wholly and exclusively” for the purpose of renting out a property, it is tax deductible, the government says. Its guidance specifically lists insurance as one of the tax-deductible expenses, as well as general maintenance and repairs, costs of services, letting agent and management fees, legal fees, accountancy fees, leasehold fees and advertising for new tenants. More examples of tax deductible expenses can be found here.