- It can save you thousands and even tens of thousands of pounds. And thanks to increased competition, there are more good deals out there. Be prepared to shop around.
- It all goes against your tax liability. This is something you accountant can sort out for you.
- Insurance premiums are going up across the board.
- You may never have to use it. There’s a fine line to be weighed up between the chances of something really bas happening and what you should pay to cover yourself.
- Some insurers have dodgy small print.
Let’s have a look at the different types of cover you need and some worth considering if you have investment property:
Buildings insurance
Buildings insurance is a must-have, not least because all mortgage lenders insist on it. It covers you in case anything happens to the building itself, including a fire, lightning strike, explosion, smoke damage, burst pipes, malicious damage or theft. Look out for buildings insurance designed specifically for landlords.The key thing to know about buildings insurance is that it covers the cost of rebuilding, not the market value. That means it’s important to make sure you’re adequately covered. Get yourself a qualified surveyor to calculate cost of rebuilding your rental property.
Some insurers won’t cover you if they think you’re letting to what they call ‘high risk’ tenants like students, large groups of single people living together or people on housing benefit. If you’re in this situation, you’ll have to shop around a bit more for your insurance and you may have to pay more than you would for tenants who are nice, middle class people with sensible jobs.
Contents Insurance
Rent guarantee insurance can be useful if you live in a low demand area and are worried about the tenants not paying for months on end. Policies tend to guarantee rent for a fixed period – usually six to 12 months – and can mean that you will have peace of mind if you need the rental income in order to pay the mortgage on the property. You must really shop around for rent guarantee insurance. Premiums are worked out in different ways by different companies from a fixed cost policy to a percentage of the annual rent. The percentage rate is the most common – usually about 3-4 per cent of the rent, but not necessarily the best option.
Other insurance to consider
Home contents insurance.
- This is something your tenant should take out (It’s not your responsibility; it’s up to them). It should cover their property from damage or theft and also your property from accidental damage etc.
- Your tenancy agreement should make the tenant liable for damage such as red wine stains and the cost of cleaning or replacing the carpet will usually be deducted from their deposit at the end of the tenancy. Do encourage them to take it out – remind them of what they could be liable for!
- If you are lucky and get a model tenant who pays up every month and doesn’t treat the flat like a municipal dumping ground, you’re doing well. But not all of them are that good.
- When you get a new tenant your inventory should include the state of furnishings and fittings as well as the number of them in the property. When they leave you will need to go through everything with them to check for damages. Normal wear and tear repairs cannot be taken out of the tenant’s deposit but damage like crayon marks on the walls, stained or ripped carpet, cigarette burns or ripped curtains would all count as damage that should be paid for out of the deposit.
- Make sure you are fair and open about any deductions, though, as a failure to return a deposit when it would reasonably be expected back can end up in the small claims court which is bad for business.
Excess
- It’s up to you what kind of excess you build into your insurance policy. Obviously, the higher the excess, the less you’ll pay on a monthly basis, but the more you’ll pay if things go pear-shaped. If you’re a bit of a chancer, you’ll go for a high excess like £300… but only do what will give you peace of mind.
- The cheapest policy is not necessarily the best for you. They all funny bits and add-ons so make sure that the policy covers the aspects you need.
- Insure through a reputable company. When it comes to claiming against your policy you don’t want to be told they won’t pay out because of the small print. You’re more likely to get the service you need from a well-established, good name.
- Get a certificate of insurance when you buy your cover and keep it in a safe place.
- Shop around. Get a good insurance broker to look for the best policy for you or, better still, look yourself on the internet. Money Magpie compares some of the best insurance deals here.
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