The impact of tenant mishaps for uninsured landlords

Research from Total Landlord reveals that landlords without insurance risk losing as much as 45 per cent of their annual rental income through damage caused by tenants. 

Figures from Total Landlord’s parent company, Hamilton Fraser, show that 85 per cent of buy-to-let landlords have opted for the sensible safety net of landlord insurance. However, 15 per cent have opted not to insure their property portfolios, leaving them susceptible to some hefty losses should their property be damaged. 

The average annual cost of landlord insurance in England is £170 per property while the average annual rental income is £11,228 per property which means the cost of insurance sits at just 1.5 per cent of income. 

While uninsured landlords do make a marginal saving by not taking out insurance, they risk spending substantially more than 1.5 per cent of their rental income if tenants cause damage to their property. 

For example, if a kitchen fire results in the need to fully replace the kitchen, it costs an average of £5,250. This is equivalent to 46.8 per cent of average annual rental income. 

If a bathroom flood results in the bathroom having to be replaced, it will cost an estimated £5,000, or 44.5 per cent of rental income. 

If a tenant paints or redecorates a room without permission of the landlord, it can cost £1,250 to redecorate a one-bed flat alone, reducing annual rental income by 10 per cent. 

Replacing two broken windows costs 4.5 per cent of rental income, and replacing a ruined carpet in a 3m x 3m room costs 2.2 per cent of rental income. 

Eddie Hooker, CEO of the Hamilton Fraser Group says:

“Any rental property is likely to succumb to some level of damage during its lifetime and although this may often be accidental, it can also be the result of a malicious act by a disgruntled tenant, in which case it can be far more costly. We’ve also seen an increase in adverse weather claims in recent years which in many cases cause a great deal of damage. 

While the vast majority of landlords are insured against such damages, there is a small proportion who run the risk of remaining uninsured or, worse still, under-insured, which is quite astonishing given the relatively low cost of obtaining insurance in relation to the potential bill for damages caused. 

Even minor damage to their properties is going to cost more than it does to take out an insurance policy and should a major disaster happen, rental incomes can be severely impacted. A loss that many landlords would struggle to stomach given the challenges with profitability of a buy-to-let investment following recent and future government policies.”

Data Tables

View the full data tables online here.