How Much Does Landlord Insurance Cost?

How Much Is Landlord Insurance

Being a landlord used to be considered a “profession”.  Today, more people than ever are becoming accidental landlords. Most of these people only have one or two investment properties. For these people, landlord insurance is vital. But, how much does landlord insurance cost?


Why Do I Need Any Insurance?

In my opinion, there are only ever two instances when you should take out insurance:

1)      If there is a legal requirement to do so (e.g. car insurance).

2)      If you cannot afford to the capital outlay required to replace or repair the product in question.

In the long run, all insurance costs the person who takes out the insurance policy. The only winner is the insurance provider. Over the course of many years, insurance premiums will always exceed the amounts you will claim on your insurance. For the majority, insurance is a waste of money.

However, don’t stop there. For most accidental landlords, and probably a majority of professional landlords, the potential financial burden if something was to go drastically wrong means that landlord insurance becomes a necessary product.



Why Do I Need Landlord Insurance?

It’s mandatory to take out buildings insurance upon the completion of a mortgage. This falls into category one. However, this alone will not give you sufficient coverage as a landlord of rental property. Landlords face different risks to the average homeowner. As a result, normal insurance policies will not cover the costs incurred by landlords.

Landlord insurance is not compulsory. However, to cover the specific risks of being a landlord, it is usually advisable, especially for those people who like to mitigate their risk exposure.


How Much Does Landlord Insurance Cost? An Example

Let’s look at an example of landlord insurance cost for a new landlord.

They have decided to buy a property to rent out. This is their first investment property:

Houses to let

They have successfully bought a nice little house for £100k. They instantly find a tenant and rent it out at £600pm: a 7.2% gross yield. They have also secured a £75k mortgage on the property. They pay 4% interest on an interest-only basis.

Their monthly income is £600. Their monthly mortgage interest is £250. Assumed monthly management fee is £80 per month. They estimate their maintenance costs at £100 per month.

Their net monthly cash flows are a positive £170 per month. They work on an estimate that the flat will be rented for 11/12 months on average. This represents an annual ROI of 5.8%.

Everything looks good. Well done them.


But Then, Disaster Hits…

Oh no! After three months, one of the pipes has burst in the downstairs bathroom whilst the tenant was asleep upstairs. It has completely flooded the house. Like this….

How Much Is Landlord Insurance - Flooding


The landlord now has a number of problems:

  • All of the tenant’s belongings have been destroyed.
  • The plumbing needs repairing.
  • The tenant has stayed in the property and have now caught pneumonia!
  • They’ve then moved out as there is damp everywhere.
  • The house needs re-plastering, repairing, dried out, redecorated, etc.
  • The house will earn no income for the 4 months during the works.

So, now the landlord still has their normal £430 per month costs. They also have the costs of repairs which are going to run up to £8,000 in total. They also have legal costs related to the court case. Given the tenant’s case of pneumonia, this could start to become very expensive indeed!

Also, not only do you have all these costs, but you have no income coming in from the house. All of a sudden the landlord insurance cost for the premiums doesn’t seem too much, does it?!



Can You Afford Not To Have Landlord’s Insurance?

So, the answer to the question “do I need landlord insurance” lies not in whether you can afford the landlord insurance cost, but rather whether you can afford NOT to have landlord insurance.

If your TV breaks, you can afford to replace it. Therefore, you should not buy extended warranty insurance on your TV. However, if all of the above goes wrong with your rented property, you will not be able to afford the resulting costs. You would be, quite frankly, in a right royal mess.



What Type Of Landlord I nsurance Is Available?

Before answering the question of how much does landlord insurance cost, we need to consider what products are available. You see, there are many different levels of landlord’s insurance:

Contents insurance for landlords: When renting a furnished property, then you may need contents cover to replace any of the items within the property which might get damaged.

Buildings insurance for landlords: Building’s insurance covers major events which damage the exterior and structure of your property. This should protect against natural events and disasters (flooding, storm damage, falling trees, etc).

Liability insurance for landlords: You, the landlord, are legally responsible for your tenant’s health and safety. You need to take out liability insurance to protect you if you are subject to any lawsuits concerning an accident, injury or in the worst case, even a fatality.

Loss of rent insurance: This insurance can insure that you have consistent income even if your property becomes uninhabitable and you are no longer able to find a tenant.

Legal cover: This protects you against legal costs arising from tenant disputes.

Insurance against accidental damage: The clue is in the name. This is coverage against damage accidentally caused by your tenants in your property.

Emergency assistance: This is coverage against the price of employing contractors when an emergency strikes. These may include locksmiths, boiler breakdown, fridge/freezer malfunctions etc.


To get clued up on the different types of cover available, it’s worth having a quick peek at this video from EBM:


How Much Does Landlord Insurance Cost?

Finally, we are ready to answer your question. How much does landlord insurance cost?

Well, not as much as you may think. For a straight forward policy, it can be as little as £100 per year depending on the levels of cover.

Building that into our example above, it would change our return from 5.8% to 5.4% for our annual ROI. This is a hit definitely worth taking when you only have one or two properties.

Remember, a major event would restrict your income or increase your costs so much that it could destroy your investment completely.

To find the right level of landlord insurance for you, and for the right price, you should compare the many different providers available. The two ways to do this are to check out the range of low prices available at Simple Landlords Insurance, one of the UK’s leading and best value providers of landlord insurance:

Conclusion – How Much Does Landlord Insurance Cost?

The absolute answer is “from £108 a year”.

The relative, and much more pertinent, answer regarding landlord insurance cost is “not much compared to what you could be forking out if something goes wrong”!!

4 thoughts on “How Much Does Landlord Insurance Cost?

  1. Pingback: Hidden costs of letting a property

  2. Great post. Just came across your site this week, so you may see a few more comments from me as I take a look around.

    Mrs LCIL & I are about to inherit a property that after it’s be overhauled & brought up to standards, we will be renting out, so this is really useful to read about.

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