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Landlords insurance is not legally required to have to let out your property. However, it is generally recommended.
Why? Because properties are worth hundreds of thousands of pounds and are seen as long-term investments. They are worth protecting against both acts of nature, accidents, and deliberate actions by the tenants.
However, there are a few alternatives to landlords insurance, which some landlords may choose to opt
It is the most basic form of protection. It means that you will pay for any damages as and when they occur, out of your pocket. In many cases, landlords may have no trouble doing this – but only if a severe problem never comes up!
Should your property be devastated by fire, or vandalized by tenants, it can cost tens if not hundreds of thousands to repair. And in the event of total devastation, the full value of your home could be destroyed.
It may seem unlikely that such damage can occur, but this is a risk you choose to take if you decide to make all payments out of your pocket.
Use Normal Home Insurance
Many landlords who have become landlords by accident may think that keeping their old home insurance on the property will protect when there are paying tenants living there. It is one of the top mistakes that new landlords make.
The truth is that your standard home insurance will be useless. You are now using your property as a way of earning income, and your traditional home insurance does not apply. If anything should happen, you will not get the compensation that you were expecting.
Choosing Individual Insurance Packages
There are several insurance packages available that might protect areas of your home. For example, you could take out an insurance package with British Gas that protects any faults to the boiler and gas systems in your home, or you could take out a package that will protect your electrics.
These are useful insurance policies to have, as they ensure any problems that occur will be fixed properly – and they will cost only a fraction of a complete landlord’s insurance package. However, you also need to bear in mind the bigger picture – that the property’s building and structure are where the most value lies.
Therefore, the essential kind of protection is for your building. Contents, fixtures, and other areas of owning a property are also likely to be included in a comprehensive landlords insurance policy, depending on the insurer.
The Risks of Going Without Landlords Insurance
Property owners face several risks when it comes to putting their property into the hands of virtual strangers. While many tenants will take good care of your property, some will damage the fixtures or even be unable to keep paying their rent. On top of this, there is always the risk that damage could occur due to fire or natural events.
Missed Rent Payments
With the country going more in-depth into recession, the possibility that tenants may not be able to pay their rent is becoming more common. In the case of residential lettings, benefits will generally replace the income, though this can take months. And when the letting is commercial, landlords are often left high and dry when it comes to rental earnings.
The main risk in these situations is that the landlord will still be covering huge outgoings, including business rates or mortgage, and will have no income to pay them off. If you have not taken out adequate property insurance, then this situation won’t leave you very well off.
Many landlords have seen landlords insurance as an optional extra, but will all the risks that there are this is simply a wrong decision.
In your own life, it is unlikely that you have ever had to claim for fire damage in the past. However, you never know when situations will occur, which will require a significant sum of money to repair the property in question. Look at the economic and domestic fire statistics; claims are on the rise.
If you choose not to take out insurance, then you will have nothing to fall back on if fire and other risks destroy a part of your property. These costs can quickly add up to tens or even hundreds of thousands, whereas the savings on not taking insurance will be considerably less.
Insurance is there as a way of protecting against these kinds of claims. Not only will they protect you from having to fork out vast sums of money, but they are also there to protect the investment you have in your property and help you out if you rely on the income from rent.
Damage Done by the Tenant
The last significant risk for avoiding landlords insurance is the damage your tenant can do to the property. The majority of tenants will take good care of your property and its furnishings. Still, there are always cases where tenants will cause extreme damage to the home – at times, leaving it unliveable and costing thousands to repair.
Many landlords decide to rent out their property only as a way to earn money, or while waiting for the value of their home to increase – and many fail to recognize the potential risks that tenants can pose. After all, nobody wants to imagine that their tenant would willingly cause damage to your property. Unfortunately, this situation is all too common, and landlords have been left stressed and have a heavy financial burden.
Find Peace of Mind
Landlords insurance is there to give you peace of mind. When these kinds of events occur, you can be sure that they will be that bit easier to deal with them. Not to mention that you will never experience a loss of earnings, or even a loss of investment altogether. Insurance is there to cover your property in several circumstances, and you mustn’t undervalue your property by taking out the right policy for you.