Landlord insurance on Residential Mortgage

Guide on landlord insurance on residential mortgage*

Not every landlord is in the business of letting property by choice. People's circumstances change from time to time.

Some temporarily move abroad for work, others move in with their partner, elderly parents may move in with their kids or to long-term care, you may buy a second home, or inherit property.
These situations leave individuals with extra homes that they decide to rent out rather than sell.
If that's the case for you, then you just became one of the thousands of accidental landlords in the UK.

Responsibilities as a landlord

While this seems like an exciting adventure and a great source of income, it does come with new responsibilities as a landlord.
One of which is to ensure the property is properly insured for all eventualities associated with letting your property.

The home you're renting most likely has a residential mortgage.

And, one of the requirements for taking out such a mortgage is you're not allowed to let out that property.

If mortgage lenders discover that you have tenants living in your residential home, there will be some dire consequences.
The lender will automatically increase your rates to reflect your current buy-to-let situation.
Since this can be viewed as mortgage fraud, the lender might enforce heavy financial penalties or force you to repay the mortgage in full immediately or the property is repossessed.
You don't have to risk all that. All you have to do is to get 'consent to let' from your lender, which is usually valid for 6-12 months, or convert to a specialist buy-to-let mortgage.

Insuring your property

Once you start letting, your residential home insurance will not be able to cover your risks as a landlord. That's why you need landlord insurance to cover your property and its contents.
Repairing or replacing the structure of your building, including any permanent fixtures, as well as contents that you give to tenants like furniture and appliances come standard in most landlord insurance policies.
These policies provide financial protection against common perils such as fire, storms, subsidence, theft, and vandalism, just to name a few. It's important to insure your property for the cost of rebuilding it if it was completely damaged by a covered risk.

Optional extras

There are several other covers that you can add to your standard cover to ensure you're fully covered for all eventualities.
This includes loss of income in case a covered risk renders your home uninhabitable, liability coverage if someone is injured on your property, accidental damage cover, boiler cover, flood cover, and so on. Basically, you need to tailor your policy to your property.
One thing that this policy won't cover is your tenants' contents; they need to take out their own renters' insurance for that.

Cost

Landlord insurance on residential mortgage costs more than typical home insurance because the risks are higher. Insurers tend to receive more claims on rented properties because most renters don't take good care of their rented spaces as the owners would.

Expect your landlord insurance to be 15%-20% more than your residential home insurance.