18 Jul The One Big Costly Mistake Former Owner Occupiers of a Property Make When they Become Landlords and How to Fix it Now!
As a homeowner, the decision to rent out your property and become a Real Estate Investor, the landlord of the ‘manor’, comes with certain obligations. One key aspect and most important change to consider is Insurance. The question is; what type of insurance will cover and protect you when things don’t go to plan?
Household insurance provides coverage in the unfortunate scenario the house is damaged by fire, theft, and for medical bills should someone have an accident and suffer an injury on your property. However, the problem with household insurance policy is that it does not offer protection the moment you turn it into a rental property and become the landlord. It is important to move fast and transfer to Property Owner Insurance policy, as this provides coverage for theReal Estate Investor and landlord’s with rental property.
Not too long ago, we had a landlord who failed to convert the insurance from household policy to a property owners policy, when they decided to rent out the apartment to new tenants and relocate overseas for work. This was a big mistake! There was an incident where the tenant suffered an injury and brought a claim against the landlord. Since, the landlord wasn’t sufficiently covered under the household insurance policy, legal proceedings ensued, and the landlord had to pay for the damages. Thankfully, the tenant didn’t suffer terminal injuries; otherwise the penalties would have been far more severe.
Why Household Policy Doesn’t Cover Rental Property
Typically, household insurance policy covers single-family, owner-occupied residences. Your home doesn’t meet this definition when you rent it out; therefore, household insurance no longer covers it.
When you rent out your home, it becomes riskier for the insurer to provide coverage. The insurer experiences more claims by policy holders on rental property because tenants usually don’t take the same “tender loving care”of the property, as you would do, as the owner occupier. Therefore, household insurance policy is not the correct cover for Real Estate Investors with rental property.
If you’re planning to rent out your home, you will need a landlord insurance policy. This policy usually costs on average around 20 percent more, than a household policy, because of increased protections.
Keep in mind, there are two comprehensive insurance packages landlords can choose for their property:
1. Landlords property insurance package.
2. Leaseholders property insurance package.
The policies provide coverage for physical damage to the property caused by snow, ice, hail, wind, fire, lightning or other perils. Coverage is also provided for household items left on-premise for tenant use or maintenance like lawnmowers, snow blowers and other appliances.
Liability coverage is also included. For instance, if a tenant or their guests suffer an injury on the rental property, the landlord policy would cover medical expenses and legal fees. If you aren’t able to rent out your property because it is being rebuild or repaired, then most landlord insurance policies would provide coverage for the rental income you lose during this period. However, it always best to check and read your policy very carefully.
If you need more information and advice about what InsurancePolicy is best for you and remain protected from unnecessary liabilities and avoid future problems, contact Stonelink International, London’s Real Estate Broker, for further assistance on + 44 (0)207 993 4081 and by email info @ stonelinkinternational.com and we will direct you to our amazing insurance broker team.