Are you Covered? How to avoid Underinsuring your Property
We are going to start you off with a statistic that may shock you – in the UK it’s been suggested that a whopping 40% of landlords underinsure. A buy-to-let mortgage can be a big financial risk, so protecting yourself with the correct insurance should be the first priority before even beginning to think about investing your future in properties.
In today’s market, it’s understandable that you want to save as much as possible when you invest, because at the end of the day being a landlord is a business, and only lucrative if done correctly. It may take years of hard work, patience and understanding, but not covering your own back could be fatal. When insuring your property, there’s so much to think about when renting to tenants. There could be obvious issues like a fire or water damage (leak, mould etc) that would affect the way the tenants live and potentially devalue your properties. Also, there’s a number of other reasons that may cost you thousands of pounds if you underinsure.
It should be noted first of all that while home insurance can be taken out, for a landlord a tailor-made insurance will be much more beneficial, addressing any scenario that wouldn’t occur to you, especially if it’s your first property on the market. For example, imagine the frustration if you have a £200k property and only take out insurance for half of that, but there’s circumstances in your policy that are not stated (boiler explosion or lack of public liability cover). All of these avenues need to be covered – not because they are a certainty but because you never know what’s around the corner.
Being a landlord is unpredictable, with every day bringing a new challenge. Maybe you have two properties and have no issues for months. However, what if one tenant needs to be evicted for failing to pay rent, due to a job loss. Will your insurance cover that expense? It could be months before you fill the property again with the UK in such unknown territory before Brexit is finalised. You need to cover theft of possessions, inexcusable damage by a tenant before vacating the property and even for maintenance that needs to be carried out on the property.
So many situations are out of your hands, but if you have adequate insurance that covers you, as a landlord you can have peace of mind with a comprehensive and specific policy that makes sure you are sorted whatever the circumstance; before, during and after a tenant leaves.
As a property owner, you need to sit down with the right legal team and surveyors, as well as contractors, to ensure you’re fully covered, with a detailed account of every penny you will need for any mishap. Doing regular valuations, brushing up on the latest industry lingo to keep ahead of the game and making sure you take out indexed linked policy cover on time will make life easier and help you balance the books, ensuring you continue to turn a profit.