The housing boom of the early 2000’s has led to many people owning and renting out second properties – something that they could not have imagined even ten years before. Although many see the housing market as the cash cow which just keeps giving, there are some serious pitfalls lurking for the unsuspecting first-timer. One of the most important and potentially costly mistakes that budding landlords make is that they do not have adequate insurance. It may not be immediately obvious, after all, shouldn’t the tenant be responsible for the property, but like it or not he buck ultimately stops with the landlord.
The fundamental aspects of landlord’s insurance
There are three basic areas:
1. Landlords Building Insurance – this insures the building itself. If you are a landlord you probably already have this for your main home, and your second should be no different – at the end of the day, the building is your source of income and probably the most expensive thing you’ll ever buy, so it makes sense to protect it.
2. Landlords Contents Insurance – again obvious if you already own your own home. Clearly if you are leasing your property fully furnished the level of cover you need will be higher than if it’s unfurnished – it’s likely that you will still have carpets and basic fixtures and fittings that will need to be covered.
3. Landlords Liability Insurance – this will protect you against any personal injury claims. We all know it’s a pain but it can be very expensive so this cover is included in most basic policies. Even basic cover should protect you against claims from both tenants and guests.
Now, moving on…
The extras in landlord’s contents insurance
Rent Guarantee, unlike landlords contents insurance and the like above, this is specific to rental properties. Essentially, this is equivalent to an income guarantee, which will enable you to plan for the future with more certainty. It will cover you if a tenant refuses to pay the rent or if the property remains empty between tenancies. This can seem as if it is too good to be true, so check the fine print carefully to make sure you getting what you want from this guarantee – you are going to be paying extra for it so make sure it’s worth it.
Finally, there’s cover available to help with legal fees. This is not in the case of personal claims like above, but more geared towards helping you if you have an unruly tenant. Legal fees are notorious for mounting up with alarming rapidity and so this cover is also very highly recommended, even though it may be at an additional cost to the basic premium.
Always buy landlord insurance from a reputable broker.