Rent Indemnity Insurance 101
Landlords may be surprised to discover that there are some important caveats to rent indemnity insurance that they may have completely overlooked. For example, as a landlord, you may have bought standard cover and assumed the policy covers absolutely everything, from fire damage to tenants defaulting on the rent. However, there might be some little detail you’ve overlooked or some fine print you haven’t read and suddenly you’re not as comprehensively covered as you thought. It’s essential that you speak up if you have any questions regarding any aspect of the policy, so that you have a clear understanding of what it entails.
Typically a landlord’s insurance policy covers the basics, like the building itself, which includes cover for fire, flooding, storms and burst pipes. In general, the policy also covers contents and, in some cases, provides liability and legal cover. However, not all policies are created equal and you should be aware that additional cover might be necessary, especially pertaining to cover for eviction of tenants or rent arrears.
With reference to evicting tenants, there are legal fees involved in reclaiming possession of your property, you should make sure that you have a good grasp of the legal costs involved and what amount the policy contributes towards these legal fees.
It might be that you’ve lost your rental income due to a fire, and the building can’t be let for an extended period of time. It’s possible to insure against loss of rental income. Most standard policies that include loss of rent will cover a period of 12 months, so you need to be sure that in the event of a disaster, like flooding or a fire, all repairs and restorations will be completed within the period covered. This is less of an issue if you just rent out a flat or house, but if you own the entire block of flats, then this could become a relevant issue and you should consider extending the period of cover, which will increase your monthly premiums somewhat but which be well worth it if your building is ever completely gutted by a fire.
With regard to tenants defaulting on the rent, it’s somewhat more complex because you’re required to ensure the tenants have appropriate references or a guarantor. You’d probably do this anyway, but it’s important to note that you have to comply with every stipulation because failure to do so could result in your claim being denied.