When you have invested big money in buying a property with the aim of earning rental income, it is sensible to protect your investment with a well-structured landlord insurance. This protects your property against damages and keeps you financially prepared to meet emergency repairs.
Here are a few tips to help you choose the right coverage for your property:
1. Get adequate coverage – The sum insured is the maximum amount you are allowed to claim if your property is completely destroyed. Ensure that this amount is sufficient for you to rebuild your home if the need arises. If this amount is too low, it may save you money in monthly premiums but it might fall short when you have to claim insurance. Similarly, a high coverage will give you sufficient money to rebuild your home, but you would also be burdened with high monthly premiums.
2. Protect the contents of your property – Contents insurance is a must if you are renting out a furnished property. Contents insurance covers the cost of carpets, furniture, curtains, home appliances, etc. Home fixtures and fittings are normally covered under building insurance but in the case of units, they are covered under contents insurance. The amount covered should be such that you can conveniently replace your old or damaged items. For this, ensure your contents insurance is on a new-for-old basis. This means even if the damaged item is very old, it will be replaced with a new one as opposed to a wear-and-tear basis where you are compensated for the loss or damage after applying depreciation and wear and tear costs.
3. Protect your building – Building insurance guards your property against accidents and natural disasters like fire, storms and floods. This should cover the cost of the building as well as any fittings and fixtures, plumbing, pipes and cables, gas lines, external structures, etc. It should also cover loss of rent when the property is damaged.
If you have financed the house on a mortgage, you may be depending on the rent to pay your monthly payments. For some, the rental income is itself the source of livelihood. Insuring yourself against loss to your property and rental income is imperative.
4. Protect yourself against loss of rent – Ensure your landlord insurance protects against loss of rent due to apartment being vacant or a tenant defaulting on the rent, or death of the tenant and the like. Some policies also cover cost of relocating your tenants when your house is damaged or being renovated.
5. Landlord’s liabilities – This protects you from legal expenses in case your tenant litigates against you. It also covers legal liability due to damage to another property or personal injury caused to a person while on your property premises.
6. Rental repairs – With rising cost of maintenance and repairs, this component of your landlord insurance will offer you peace of mind against costly repairs which can be caused by unforseen events such as a blown water pipe which can flood the rental property, or a boiler which stops working unexpectedly.
7. Malicious damage – Apart from unintentional damage to property and contents, you may also suffer malicious damage caused by unhappy tenants. For example, your tenant may kick the door in or damage the glass in the property. Your rental insurance should cover such damages.
Always remember to compare different insurance packages before you buy since coverage, features and premium can differ widely between providers.
Property investment can be challenging. If you are considering making one, Clever Finance can help you in arranging a loan. Contact us to get started.