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Do I Need Buy-to-Let Property Insurance to Get a Mortgage?

Buying a rental property is a big investment, and if you’re new to buy to let mortgage, there are lots of things to get to grips with before you submit your first application.

Most mortgage providers will want to see evidence of insurance before offering a loan, primarily to offset their risks.

For example, if there were a weather disaster and a property with a mortgage secured against it became uninhabitable, a lender would be much happier to know that the landlord has robust buildings insurance to mitigate the possibility of losing the debt.

Today mortgage advisors runs through the various types of landlord insurance that are worth having.

What is Landlord’s Building Insurance?

Buildings insurance, covering the fabric and structure of a property, is typically a prerequisite for any mortgage product.

Most buy-to-let lenders ask for a copy of the landlord’s building insurance (aka buy-to-let buildings insurance), which works like a regular insurance policy, protecting against things like fire, theft and flood damage.

The primary difference in landlord’s building insurance is that you have the option of buying a policy that protects you against tenant-based risks, such as loss of rent or covering the costs of damage repairs.

It can be worth adding accidental damage or choosing a buy-to-let insurance product that includes this as standard.

Do I Need Contents Insurance as a Landlord?

There’s often confusion about who is responsible for insuring different aspects of a rental home and which contents would be considered covered if a claim were to be made.

Fittings, such as walls, doors and fixed cabinets, are normally deemed structural, whereas anything moveable tends to rely on contents insurance protection.

Most landlords that accept responsibility for contents insurance will restrict their coverage to any furnishings included with the property – usually with an inventory of the items included.

You can buy contents insurance for a buy-to-let home as a standalone insurance product or package it up with your buildings cover.

In most cases, tenants are responsible for purchasing adequate insurance for their personal belongings, although landlords may also offer tenants’ liability insurance rolled up in part of the rental cost.

Is Rent Guarantee Insurance Worth Paying For?

One of the biggest risks for landlords is that a tenant stops paying rent, falls into arrears, leaves without notice, or disappears with a debt owing.

Landlords reliant on rental income to meet buy-to-let mortgage obligations do well to purchase rent guarantee and/or legal expenses cover to deal with this sort of situation without any severe financial repercussions.

This insurance product normally covers the rental arrears and the legal expenses of eviction, which can be invaluable in a complex tenant scenario.

Should Landlords Take Out Mortgage Life Insurance?

Life insurance is not mandatory, and even if a mortgage provider recommends you take out this cover, it shouldn’t be a requirement to be offered a loan.

Applicants taking out this cover are normally cohabiting, married or in a civil partnership and insure themselves because they wouldn’t be able to sustain mortgage repayments on one income if anything were to happen.

Buy-to-let landlords don’t necessarily need critical illness or life insurance because the rent should cover the mortgage costs comfortably.

What Cover is Included in Buy-to-Let Insurance?

There are thousands of insurers and products out there, but a comprehensive buy-to-let insurance product usually incorporates several elements:

  • Buildings insurance covers the cost of rebuilding or replacing the property’s structure, such as kitchens or bathrooms following a flood or repair works after a fire.
  • Contents insurance is usually used to insure furniture, carpets, and electrical items or appliances provided within the rent on a furnished or part furnished home. Note that your insurance policy protects your possessions, not your tenant’s private belongings.
  • Liability insurance is a protection for landlords against the prospect that a tenant could sue them if an accident happened that caused injury, purportedly because of the layout or condition of the property.
  • Loss of rent insurance, which we just discussed, can be vital if you are at risk of void periods or tenant’s arrears that impact your financial ability to keep up with repayments.
  • Legal cover can be crucial when a tenant dispute arises, paying for defence or claimant costs on either side of a legal argument.
  • Home emergency cover is equally important for rental properties, particularly if you aren’t using a lettings agent with direct links to local call-out tradespeople.

Portfolio landlords may also wish to consider multi-property cover, picking and choosing between the above elements to decide what is worth having blanket coverage for.

What Insurance Should I Get as a Buy-to-Let Landlord?

Insurance is a huge market, so the best bet is to work with an independent broker who can recommend the policies your mortgage lender will focus on most and identify cost-effective products with a sufficient level of cover.

Please give Revolution Brokers a call on 0330 304 3040 or message us at [email protected] for more advice about landlord insurance, which policies your lender will expect you to have, and where to buy the best quality protection.

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