Once you’ve decided to invest in property, there are a million things on your mind – from checking listings to securing a mortgage.
Disentangling the complexities of insurance offers often isn’t high on a new property investor’s list of priorities.
To help you get an overview, here are four types of insurance that you’ll likely need for your new property.
Heads up: If you’re buying to let, most of what we’ll mention comes bundled as a landlord insurance package.
None of these types of insurance are strictly required, but mortgage lenders will often demand them.
Table of Contents
1 – Building and Contents
First off, basic buildings and contents insurance is crucial.
This type of insurance typically covers damage arising from floods, fires, and storms, as well as explosions, vandalism, and sometimes even riots or terrorism.
Plus, there are policies that also address more novel threats. For example, if you invest in smart homes, you should seek cover against cyberattacks, which are increasingly frequent.
Going even further, all-risks policies cover all property damage from risks not specifically excluded.
For landlords or buy-to-let investors, specialized buildings insurance provides more extensive cover than home insurances. Deacon, for example, covers the building itself, along with garages, outbuildings, car parks, pavements, drives, fences, CCTV, drains, sewers, and septic tanks.
Furthermore, the contents component in this type of insurance covers anything in the building that isn’t owned by tenants, like kitchen appliances or laundry machines.
2 – Public Liability
Next up, public liability insurance covers any damage done to third parties on your property, both to themselves and to their belongings.
For example, if someone slips in the hallways of your building, or on the section of sidewalk just in front of it, and breaks a leg as a result, they might sue you for damages depending on the circumstances.
Note that to make any claims under this type of insurance, insurers usually require you to have a protocol of maintenance work and inspections you carry out on the property.
3 – Tenant Default Insurance
Another very useful type is tenant default insurance – especially for buy-to-let investors. It’s often also called a rent guarantee.
As the name suggests, tenant default insurance covers your loss of income if tenants don’t pay their rent.
To make claims, you’ll have to prove that you’ve tried to collect the rent. Sometimes, you also need to have taken some steps towards evicting your tenants.
4 – Legal Expenses Insurance
Finally, you should think about getting legal expenses insurance when you’re investing in property.
This kind of insurance covers legal expenses related to claims made against you. For example, it will cover you if a property boundary dispute arises.
The kinds of expenses that are covered include hiring lawyers and associated court costs. Many providers also offer instant access to a lawyer or free legal advice.
Legal expenses insurance often comes bundled with public liability insurance.
Property investments done right can be hugely profitable. Getting the right types of insurance is an essential step toward investment success.
With the above guide and some research of your own, you’ll be able to pinpoint the insurance policies that best suit your needs.