Why normal home insurance will not cover a rental home?
One of the most frequently asked questions when people first start letting out their main home is whether or not they need to change their home insurance, and if ordinary home insurance will provide cover for a rental home.
If you are intending letting your home, you need to tell your insurers straightaway, as your normal insurance would be invalidated. Your insurer will need to adjust your policy (and probably charge you a higher premium) even if you are just renting a room to a lodger.
When you rent out your home to a tenant, you need to take out landlord insurance. This is similar to home insurance, in that it can cover both the building itself as well as your contents such as any furniture, but not your tenant’s possessions. It also covers several important things that ordinary home insurance does not. For example, landlord insurance provides cover for any third party risks that you may encounter as a landlord. It will reduce your level of risk, and will ensure that you do not lose out financially if anything goes wrong.
If you have a buy-to-let mortgage then you will be required by your lender to have landlord building insurance, and even if you don’t need a mortgage it would be foolish not to have it. Whether to opt for contents cover and the level of cover that you choose will depend to some extent on whether the property is let furnished or unfurnished; though even if it is unfurnished and you leave carpets it is advisable to have at least a minimum contents cover.
There will almost certainly be times in between tenants when your property is left empty for extended periods, and landlord’s insurance will cover you on these occasions subject to certain restrictions. These may include the requirement that the building is inspected regularly and that the water is turned off during the colder months of the year.
Generally there are also some add-on optional extras that landlords can select, such as rent guarantee and squatter protection. The first of these covers you should your tenants stop paying rent. This includes compensation for the loss of rental income along with the costs of evicting your tenants. The second covers you for the costs of evicting squatters.