What Insurance Do You Need For A Rental Property?

A Checklist For New Landlords

Investing in property is different to investing in shares or other financial instruments. A share price might go up or down (or both in the same day) but there isn’t much that can happen to the financial instrument itself. You either win or you lose, hopefully you win but you need to know what you’re doing.

Property on the other hand is a real physical asset, which means something could happen to it. So it’s important to know what insurance is available to cover a rental property if something does happen.

When done properly, property can provide steady cash flow and capital growth over time and has been a proven investment strategy for millions of investors in the UK. Normal working people who have wanted to boost their retirement funds or even retire early have done it successfully with property.

But some people may be discouraged after watching some of the property horror shows on TV and think that property is a dangerous investment. With insurance you can cover the risk and still get the benefit from investing your hard earned funds in property. You just include the cost of the insurance in your calculations when looking at a rental property and it would normally be covered by the rent.

What Insurance Do You Need For A Rental Property?

There is a wide range of insurance products available to cover various types of possible incidents that may or may not happen in a property. You may not need all of them but here are a few of the main ones to consider… to help you sleep easier at night!

Building Insurance.

This covers the cost of repairing damage to the structure of the property, the bricks and mortar, roof, floors, garden shed etc. It also covers the full cost of rebuilding your house if you are extremely unlucky. It usually covers things like fire, water damage, frozen/burst pipes, fallen trees, subsidence as well as things like vandalism and cars crashing into the living room! Damage to the actual building rather than the stuff inside. Having this is normally a condition of getting a mortgage and lenders won’t lend on a property without it, but if you buy a property with your own funds, don’t forget this or you will have to pay for the rebuild yourself!

With leasehold flats, the buildings insurance may be included in the service charge that you pay to the freeholder or you may have to get this yourself. Check the terms of the lease.

Contents Insurance

This covers the stuff inside the building like furniture, electrical items, laptops, bicycles kept in the home, clothes, jewellery etc. This is often paid by the tenants themselves to cover their own possessions. It can also cover the tenant’s liability to compensate you the landlord for accidental damage they have caused in the property.

Accidental Damage Insurance

You can get accidental damage insurance to cover things that get damaged by your tenant. For instance, if you furnish the property and they spill wine on the carpet, break the TV or puncture a pipe while hanging a picture. These things may also be covered by the tenant’s own contents insurance.

Boiler and Central Heating Cover.

This covers repairs to the gas central heating system, including boiler, controls, radiators and hot water cylinder. It can also cover the annual service of the boiler, repairs to the pipes and plumbing and unblocking drains. You can also get Home emergency cover that covers the boiler, plumbing, gas or electricity failure, central heating and hot water failure, pest infestation, damaged windows, doors and locks etc. If you’re concerned about getting a call from your tenants at 3 in the morning, this one might be for you.

Property Owners’ Liability Insurance

Property owners liability insurance provides cover if the tenant decides to make a claim against the landlord for an injury. It protects you the landlord if a tenant or a visitor gets injured in your property. This is normally included in specialist landlord insurance policies.

Landlord Insurance Saves The Day!

If this list makes you want to run a mile from property, don’t worry… Landlord insurance policies usually cover most if not all of the above. You may only need one policy that covers the usual things that happen in rental properties up and down the country and speaking to an insurance provider can ease your concerns.

That’s what insurance is for, that’s what you pay for, so you don’t have to worry about these things. If something happens in the property, you call the insurance people and they sort it out. It’s just a cost of being a landlord and the rental income should cover the cost of the insurance anyway.

Don’t Let Your Fears Ruin Your Dreams!

If you dream of retiring with a portfolio of properties providing you income while you relax on the beach, don’t let these TV horror shows put you off! Plenty of people have retired through owning rental properties and have not regretted it. You just have to take the necessary precautions and get the right advice. While we are not property advisors, we can help you find great rental properties that fit your requirements and budget.

If you would like to talk to us about possibly buying a rental property (or even two)… just get in touch on the ‘Contact us‘ form below and we can give you a call and go over what you’re looking for.

We don’t do hard sell, we won’t try to convince you to buy any properties from us… it’s just to see if we can help you with your property plans.