Most UK homeowners are fully aware of the importance of good building and contents insurance; provide protection in case things go wrong. If you own a property that is not used as your home but as a rental business, do you know that the standard coverage of buildings and contents is insufficient (and in some cases it will be declared void if your property is occupied by tenants rather than yourself)?
Homeowner’s insurance is a must for anyone who owns property that is used as a business to generate rental income, whether it is residential property or property used for business. It is the only real way to ensure that you have adequate coverage in case something happens to the property while it is occupied by your tenants. Property of any kind is a significant financial investment and it is wise to insure your property against any damage that may occur.
Types of homeowners insurance
Building and content insurance policies for homeowners
There are many types of homeowners insurance policies available, and just like any other policy, you need to pay attention to what the policy covers and what is excluded. As with standard homeowners policies, you will find both homeowner’s construction insurance and homeowner’s contents insurance. Building insurance is a must, because if something structural were to happen to the property, the cost of repair or even reconstruction could be significant. Contents insurance can be tailored to suit your property type and will naturally cost more (but provide more coverage) if you rent your property fully furnished. If your rental property is furnished, try purchasing a policy that offers “new for old” replacement coverage.
Landlord liability insurance
Homeowner’s liability insurance is an important policy that will cover you against most risks (always check the policy wording to see exactly what is covered before you buy). Personal injury claims are becoming more and more common, which means that tenants are suing landlords for accidents that may have occurred in the home. Your homeowner’s liability insurance will provide you with coverage for this type of claim, in addition to legal coverage in the event that the case reaches a court of law.
Rental income loss insurance
Your rental property is a business first and foremost, so your rental income is a high priority. Your buildings and contents policies will cover you financially if the property was damaged by a flood or fire, for example, but what about lost income while the property is uninhabitable during repairs? The mortgage lender will still expect you to meet your monthly payments, but without rental income this can be difficult and could stretch your cash flow to a breaking point. A good homeowner rental income insurance policy will cover rental income for a specified time, and most policies cover a 12-month period.
Homeowner’s insurance is a must for anyone who owns one or more properties rented to renters. Insurance policies don’t have to be expensive, and it’s often worth shopping around to find a price and policy that suits your needs. Protecting your financial investment is the trickiest thing to do and a good insurance policy will be worth the premiums should the worst happen to your property.