Buying a rental property can be a great investment. You have the benefit of charging rent to your tenants, which contributes towards paying off your investment mortgage. In essence, your tenants are helping to build your wealth with each rent payment they make.
You may have done your calculations about how much rent you’ll receive and how much your mortgage payments will be, but have you factored the cost of in your insurance premiums as well? All landlords should consider taking out insurance designed specifically to protect your investment.
Many landlords realise they need to insure the building against damage or destruction. What you may not realise is that there are plenty of other types of coverage that may offer additional levels of protection. Before you sign up for any insurance policy for your rental property, consider some of the following types of cover.
Specialist Landlord’s Cover
If you purchase a standard insurance policy for your rental property in your own name without telling the insurer that it’s being rented out, chances are any claims you make could be refused. It’s important you take out a specialist policy designed for landlords. Most policies should insure the building, along with covering any loss of rent if the property can’t be let during repairs or maintenance.
Always check what your policy includes and know precisely what’s covered. You should also check whether the sum you’re insured for is sufficient to cover the cost of repair or replacement of the building. If you notice any shortfalls in coverage levels you can increase the amount covered or purchase additional policies to protect your investment further.
Landlord’s Contents Cover
Some landlord’s insurance policies may also allow you to add coverage for any contents. Most landlords assume that the tenants will cover their own possessions, so they don’t worry about adding content coverage. However, you also need to remember that internal items, such as carpets, curtains, blinds, stoves, ovens, light fittings and other such fixtures are considered your contents. They certainly don’t belong to the tenant. Some landlords also provide fridges, dishwashers and other appliances within their investment properties, so contents cover will apply to those items.
Rent Guarantee Insurance
You may also want to consider the benefit of adding rent guarantee insurance to your policy. After all, not all tenants pay their rent. While you can commence proceedings to evict your tenants, the process can be lengthy. The longer it takes to evict those non-paying tenants, the more money you lose. A rent guarantee insurance policy can cover your lost rent up to an agreed amount. Your policy should also include legal expenses cover, which can be extremely handy throughout the eviction process.
Loss of Rent Coverage
Loss of rent insurance covers you if your property is unable to be rented after it’s been damaged, such as in a fire or a flood. If you rely on your rental income to cover your mortgage payments, loss of rent coverage can be crucial. There are also companies that will cover the cost of accommodation for your tenants in the event they need to vacate the premises temporarily while repairs to the property take place.
Malicious Damage Cover
While most tenants are happy to take care of your property, there are some tenants who have a tendency to trash other people’s property when they’re feeling put out. If a tenant decides to smash a hole through your door or throw a TV through your window, an insurance company will consider those acts to be malicious damage. Many companies will also offer lock and key replacement cover within a malicious damage policy.
Landlord’s Liability Cover
Landlord’s liability insurance can cover you for up to £2,000,000 in the event that your tenant sues you after being injured in your rental property. Your policy should also cover any employees working at the property in the event of being involved in an accident.
Owning an investment property and earning rental income can be a great way to build wealth and grow an investment portfolio. Of course, property isn’t cheap so it really pays to have the right landlord’s insurance in place to protect your investment.
Find landlord’s insurance now with City Insurance.