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How much is landlord insurance – and how can you cut your costs?

How much is landlord insurance – and how can you cut your costs?
How much is landlord insurance – and how can you cut your costs?

Landlord insurance is a specific type of home insurance for people who let out a property to tenants, rather than living in it themselves.

In addition to providing protection for the structure of the building from risks like fire, flood and theft, it may also cover damage by tenants, legal costs and loss of rental income, depending on the level of cover you choose.

Here, Telegraph Money explains the factors that can affect the cost of a landlord insurance policy, and how to get a cheaper deal.

This guide will cover:

The cost of landlord insurance 2024

The average cost of landlord insurance in the UK is currently £170 a year, according to analysis by NimbleFins, which carries out personal finance research and analysis.

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One of the many factors insurers take into account when calculating the cost of landlord insurance will be the structure of the property you would like to insure.

The most expensive properties tend to be flats in a converted building, with an average cost of £200. The cheapest is a semi-detached house, at £150.

These examples are based on quotes for buildings-only cover.

This means that the structure of the property – along with permanent fixtures like a fitted bathroom or kitchen – are covered.

It doesn’t include any additional cover for risks like loss of rental income, legal expenses or landlord’s contents, such as furniture or appliances.

What affects the price of landlord insurance?

The rebuild cost of your property

The NimbleFins examples in the table above are based on a property with a £200,000 rebuild cost.

Not to be confused with the market value of your property, the rebuild cost refers to the amount of money it would cost to rebuild it from scratch.

It’s important because a building’s insurance policy should cover the cost of rebuilding your home if an event such as a fire or flood meant it was damaged beyond repair.

The higher the rebuild cost, the more expensive your landlord insurance is likely to be.

A property that would cost £300,000 to rebuild, for example, would cost an average £203 to insure, according to NimbleFins, compared to £137 for a property with a rebuild cost of just £150,000.

The age of your property

Insurers will also want to know how your old property is, with older and period properties typically costing more to insure than newer, modern homes.

The average estimated annual premium for a property built after the year 2000 is £141, according to NimbleFins. That compares to £167 for one that was built before 1850 – a difference of 18pc.

There are many reasons why older properties cost more to insure.

In addition to being more susceptible to problems like subsidence and damp, they may also have outdated electrical wiring, plumbing and drainage.

Period or historic properties might require specialist tradespeople or materials for some repairs as well.

New homes, by contrast, will likely have benefited from better safety and security standards, and are likely to need less maintenance.

Your postcode

The location of a property can also make a big difference to the cost of landlord insurance.

Analysis from the Alan Boswell Group found it’s fair to say that properties in London and the South are more expensive to insure than the North – just as they are to buy.

However, the insurance broker acknowledged there will sometimes be hotspots within certain areas that buck those trends.

The most expensive postcode in Britain, for example, is W5 2 in the London Borough of Ealing, where landlords shell out a staggering £1,443 for landlord insurance.

However, head east to E1 3 (Whitechapel) and landlords are only having to stump up £68.99 a year – one of the cheapest postcodes in the UK.

Some locations may also face local risks that push up the cost of landlord insurance. Insurance will always be more expensive, for example, in areas with a higher risk of floods.

Your tenants

Your insurer will also want to know what type of tenant will be living in your property, or if it is likely to be unoccupied for a period of time.

According to the Alan Boswell Group research, the average landlord insurance bill for a property with employed tenants is £207.90 a year.

However, if the property is providing a home for students, the average insurance bill is much higher, coming in at £303.69.

But students aren’t the most expensive category – that accolade goes to company lets at £391.76, ahead of unoccupied properties at £389.76.

Your optional extras

When you take out landlord insurance, you will be offered a raft of optional extras, such as accidental damage or legal expense cover.

While these “bolt-ons” can make your cover more comprehensive and potentially offer good value for money they will all bump up the cost of your landlord insurance, in some cases quite substantially.

The figures in the table below are based on sample quotes:

How to cut the cost of landlord insurance (without skimping on cover)

While there’s little you can do about when your buy-to-let property was built or where it’s located, there are plenty of other ways you can cut the cost of insuring it as a landlord.

  • Use price comparison websites: it’s a good idea to shop around for landlord insurance every year – don’t just auto-renew with your existing insurer. Bear in mind the cheapest policies are unlikely to be the best, so always compare cover levels for each element of the policy to ensure you’re getting good value for money

  • Request an accurate rebuild cost: if it’s too high you will end up overpaying for your insurance. Try the ABI’s rebuild calculator to help

  • Consider optional extras carefully: these can have a substantial impact on your cost. Before you decide think about how much cash you have in reserve and how you would cope if you were hit with a surprise bill

  • Pay for your policy annually: monthly payments might make budgeting easier initially, but you will likely be charged interest for the privilege

  • Take care of your property: poor maintenance and lax security increase the risk of claims which in turn will push up the cost of your landlord insurance

  • Increase your voluntary excess: by agreeing to pay more towards the cost of a claim, your insurer will normally charge a lower premium

  • Be careful who you rent your property to: by screening tenants properly you reduce the risk of incidents and damage that could result in you making a claim

Landlord insurance FAQs

Do I need landlord insurance?

Landlord insurance isn’t a legal requirement, but if you have a mortgage on your property, it’s likely your lender will insist you have buildings insurance – and it may even specify needing landlord insurance before you can borrow.

Even if you don’t have a mortgage, landlord insurance could be a sensible investment and spare you an expensive bill if disaster strikes or you encounter problems with a tenant.

Why is landlord insurance so expensive?

Landlord insurance often costs more than home insurance.

One of the main reasons is that tenants typically take less care of a property than owner-occupiers, and therefore there’s a higher risk of a landlord needing to make a claim.

There are also additional risks that landlords face that homeowners don’t, such as having periods where the property may be empty, causing a loss of rental income.

How much does landlord insurance increase after a claim?

If you make a claim on your landlord insurance, your premium will be more expensive the next time you renew your cover.

Even if you switch to a new insurance company, you will have to tell them about your claims history, so the claim may still have an impact on the price you pay.

Just how much extra you will need to pay will depend on the size and nature of the claim, as well as the insurer in question.

For this reason, it makes sense to think very carefully about making small claims that you could afford to cover yourself.

No-claims discounts mean the longer you can go without claiming, the cheaper your insurance is likely to be.