How to insure your investment property
Landlords and investors need to be aware that an existing, standard buildings or contents insurance policy may not cover the property or its contents when it is let or empty.
If you are planning to let out your own home, you must advise and obtain consent from your mortgage lender and existing insurer. Failure to do so may render your landlord insurance void in the event of a claim.
When choosing tenants it might be worth considering that some general insurers will not grant cover for certain categories of tenants, such as students, multiple single sharers and tenants in receipt of state benefits.
Almost 40 per cent of UK properties are under-insured. It is essential that the sum insured represents the full rebuilding cost of your property, not its market value.
- Burst pipes or leakage of oil
- Storm or flood
- Malicious damage
Most policies will compensate you for loss of rent if the property is uninhabitable following damage from one of the above events. Check the level of compensation you might expect.
If your investment property is part of a block of flats, you will need to find out who is responsible for insuring the structure of your building.
In some instances the owner of the block will already have buildings insurance to cover this, meaning you will only need to take out contents insurance for your flat.
Most specialist insurers offer either a full contents policy or a limited contents policy. As a general rule, if your property is let fully furnished and the contents would cost more than £5,000 to replace, then you should opt for Full Contents Cover.
Items likely to be covered include furniture, TVs and entertainment equitment, curtains and carpets, and clothes.
If the property is part or unfurnished, then a limited contents policy, with a limit of around £5,000, would cover such items as carpets, curtains, light fittings and white goods on a new for old basis.
These policies will also provide the landlord with Employer's Liability and Landlord's Liability. Examples of injuries to tenants or their guests caused by, for example, defective cookers and loose carpets, can result in substantial claims.
Tenants should be made aware that any items taken into the property are their responsibility to insure.
If you live some distance from the property, and have not taken a full management contract from your letting agent, then this type of cover will provide assistance in the events such as plumbing problems, leaking roofs, failure of electricity supply and lost keys.
These policies cover emergencies - they are not a repair service resulting from a lack of routine maintenance.
For properties both in the UK and overseas, insurers demand fairly stringent security arrangements, including burglar alarms and mortice locks. However, when insuring overseas, they may go further and demand that you fit window and door shutters.
Insuring your overseas property
The most important difference between insuring a UK property and an overseas property is that the latter is likely to be uninhabited for longer periods. If you are using it as a holiday home, or letting it out during holiday periods, you must be certain that your landlord insurance policy covers the periods in between.
Make sure that you read the small print: some policies insist that if the property is to be unoccupied for more than 30 consecutive days, the gas, electricity and water must be turned off at the mains and water and heating systems drained. Failure to do so could result in claims not being met.
As in Britain, many insurers demand fairly stringent security arrangements, including burglar alarms and mortice locks. However, when insuring overseas, they may go further and demand that you fit window and door shutters.
Accidental damage to contents is more common when insuring rental properties. Tenants and holidaymakers might not take as much care as owners, and items such as CD players, TVs and spin dryers can be damaged by misuse. Check your policy covers any breakages.
If in any doubt about taking out insurance for overseas property, it is a good idea to do your research and, if necessary, choose a specialist insurer to guarantee the most appropriate level of cover.
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