If you own a buy-to-let property, you might be considering renting it to a close friend or family member. However, you might be unsure if this means you’ll need landlord insurance. 

Renting to family or friends can seem like an ideal arrangement, but this can actually be more complex than renting to strangers. In this guide to renting to friends and family, we’ll cover everything you need to know, including:

• What is landlord insurance?
• Can I rent out my property to family or friends?
• Are family members classed as tenants?
• Do I need landlord insurance if I’m renting to family or friends?
• Is it a legal requirement to have landlord insurance when renting to family or friends?

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What is landlord insurance?

Landlord insurance is an umbrella term for insurance policies designed to protect landlords from the risk of property rental, such as property damage or loss of rental income. It’s different from home insurance, which is designed for homeowners. 

There are various types of landlord insurance, but the main ones are landlord building insurance and landlord contents insurance. Some other policies that are helpful to have are liability insurance, legal expenses cover, rent protection and home emergency cover.

For a detailed breakdown of the different types of landlord insurance, check out our blog, ‘How to choose landlord insurance to protect your properties’. 

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Can I rent out my property to family or friends?

The simple answer to this question is yes, you can. Many landlords rent properties to family members in the UK, often to their adult children and their partners. However, just because this is fairly commonplace doesn’t mean that you shouldn’t consider carefully whether this is the right decision for you. You’ll need to think about what will happen if the property is damaged or your friend or family member is unable to pay rent. Any property issues could harm your relationship with them. 

Are family members classed as tenants?

If you’re considering renting your property to a close family member, such as a child or sibling, you might wonder if your mortgage lender would consider them a tenant. 

Whether your family member is paying you rent or not, they’ll be considered a tenant. This means you’ll need a suitable buy-to-let mortgage. Additionally, most mortgage providers will use different lending criteria if they're a close family member. 

If you have an existing buy-to-let mortgage, you'll need to check the terms and conditions to see if you can rent to family members with that mortgage. Many lenders believe landlords will be reluctant to evict family members if they cannot pay rent, meaning family tenants are viewed as higher risk. So, you’ll need to consider what this will mean for your mortgage before deciding to rent to your family. 

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Do I need landlord insurance if I’m renting to family or friends?

Although you might think that renting to a close friend or relative means you won’t require landlord insurance, it is still strongly recommended. Standard landlord insurance will protect your property from damage (for example, if there’s a fire), insure any items you provide to the tenants (like white goods or appliances), and cover you if there’s an accident in or as a result of your rental property.

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Is it a legal requirement to have landlord insurance when renting to family or friends?

There is no legal requirement to have landlord insurance, regardless of who you’re renting your property to. However, your mortgage lender will likely require you to have landlord building insurance to protect the physical structure of your property. 

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Specialist Landlord Insurance by Lets Insure

Just because you’re renting to family or friends, this doesn’t mean that you shouldn’t have the appropriate insurance in place to protect yourself and your rental property. Although a standard landlord insurance policy is essential, a range of other policies can offer you enhanced protection. 

Lets Insure offers a range of specialist insurances designed specifically for landlords, including rent guarantee insurance, home emergency cover and deposit replacement insurance.

Rent guarantee insurance

Although you might not like to think that your friend or family member will stop paying rent during their tenancy, it is a possibility. This cover will protect you if that happens. 

Our rent guarantee insurance will pay you up to a maximum amount of £2,500 per calendar month from the date the tenant first falls into arrears until you gain legal vacant possession.

Lets Insure also offers a premium Rent Guaranteed service, which ensures you’re paid your rent on time each month regardless of whether your tenant pays on time.

Home emergency cover

This gives you 24-hour access to an expert team of certified contractors who will resolve any issues or emergencies with your rental property, usually on the same day they’re reported. Our home emergency cover gives you and your tenants peace of mind that if there’s an emergency, it will be handled quickly and professionally. 

Deposit replacement insurance

This insurance acts as an alternative to a standard tenancy deposit. Your tenant will pay us a non-refundable fee (approximately one week’s rent) instead of a typical deposit.  

if there's a dispute about damage to the property, the policy will cover legal costs up to £50,000. If a settlement can’t be reached, this policy will pay 6 or 12 weeks of rent, depending on the level of cover you’ve chosen.

Visit our site to view our full range of landlord insurance policies that can help protect your property regardless of who you’re renting to. 

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