What Does Landlords Insurance Cover?
If you are thinking of taking your first steps towards buying a property to let out then you might have quite a few questions you need answers to. This is a terrific type of investment which could turn out to give you a huge amount of financial freedom in the future but you will want to know everything about it before going ahead.
One of the most important points to think about is around the insurance cover you have in place for the property. Getting an insurance policy is something you probably do without even thinking about when it is a house you plan to live in. However, what kind of policy do you need for a place you plan to let out to someone else? Quite simply, you need something called landlords insurance cover. The following are the main points about what this kind of insurance covers.
Buildings and / or Contents
Just as with the insurance policy you take out on your main home, there are a couple of main sections to look at. In most cases where a bank mortgage is involved you will need to get the buildings covered, while you can also choose to cover the contents too. Sometimes it can be difficult to work out what is covered by buildings insurance and what it under contents. I always use the definition which an older work colleague gave me when I worked in an insurance company quite a few years ago. He would say that if Godzilla came along and turned the house upside down then everything that fell out would be the contents and what was left would be covered by the buildings insurance. This isn’t always 100% accurate but it is a decent starting point for us to use. The most sensible and thorough approach is to cover both the buildings and the contents, although in some cases the landlord might not have enough of their contents there to make it worthwhile.
The Risks Covered
The risks which are covered by a landlords insurance policy are basically very similar to those which are covered by the policy on an owner occupied house. Some people expect the cover to be greatly reduced because a tenant is living there but this isn’t the case. Provided that you use a professional insurance company like CIA Insurance Ltd you will find you are covered for a huge range of risks. Accidental damage is one risk which can be covered but which many new landlords don’t expect to find in their policy. Malicious damage by tenants can also be a very useful type of cover to have, as it will put your mind at ease in this respect. Finally, the loss of rent aspect of a good landlords insurance policy is something which can come in extremely handy. This cover means that you get paid for the rent you miss out on when the property has been made uninhabitable due to one of the risks which are covered under the policy.
Buying a property and letting it out to tenants is a fantastic way of building up your wealth. If you get it right then after a few years you will have a house which is worth a lot more than it was when you bought it and you won’t have paid any mortgage repayments on it. However, to make sure that you can make this investment without any worries it definitely pays to sort out some insurance at the start. This will help you enjoy watching the value of the property rise over time without having to worry about what could happen to it in the event of some sort of accident or disaster.