Letting a house or flat that you own is an excellent way to generate a steady stream of additional income. In the UK, the pandemic is reshaping the rental market: rents are going down in the capital, but skyrocketing everywhere else.
However, as with any venture, letting your property entails a certain amount of risk – from legal challenges to accidents. Your own home insurance policy is not sufficient to cover these risks.
Instead, various kinds of insurance are available specifically for landlords and owners of rental properties. Here’s the run-down.
To start with, there are different kinds of specialised building insurance, depending on whether you own a single flat, a house, or a block of flats.
This type of insurance covers you in the case of catastrophes such as fires, floods, and storms, as well as vandalism.
Common add-ons to this are loss of rent insurance and alternative accommodation insurance. These become relevant if your building is so damaged as to become uninhabitable, and your tenants are consequently not paying rent, or have to stay somewhere else until the damage is fixed.
Tenants will likely take out their own insurance policy to cover their personal effects, from furniture to jewellery.
Contents insurance for landlords, though, covers all the elements in a property that do not belong to tenants. These include furnishings outside the tenants’ rented spaces and elements such as built-in furniture and kitchen appliances.
Landlord liability insurance
Next up, landlord liability insurance protects you against compensation claims if your tenants or visitors are injured on your property, or their belongings are damaged.
For example, someone could trip over loose floorboards and break a leg. Or, more seriously, they could suffer an electric shock due to faulty wiring. The result? You might be facing a lawsuit of significant proportions.
Landlord liability insurances will cover you against the claim, and the related legal expenses.
Tenant default insurance
Your tenant fails to pay. In these economically challenging times, this is not an uncommon scenario. But it also leaves you with a gap in your own income stream.
This is where tenant default insurance comes in. Once a tenant has failed to pay their rent for at least two consecutive months, this kind of insurance steps in to make up the deficit for a period of up to eight months.
The only pre-condition? To stay covered, you have to check potential tenants’ credit and liquidity before renting to them – and keep proof that you did so.
Legal expenses insurance
Legal expenses insurance, finally, does exactly what it says on the tin. It covers you in case you face legal challenges related to letting your property. These include eviction fees, court costs while seeking evictions, or legal expenses in property-related liability cases.
Like other types of insurance on this list, legal expenses insurance might be bundled up in an insurance package for landlords. When comparing offers, be sure to look out for overlaps between providers.