Imagine you could buy a house in real life just like how it’s done in Monopoly. Simply have the right amount of cash, and you’re good to go. It’s too good to be true, and there’s a good reason why; anyone owning, building or renting property needs to have the right insurance in place as a security measure.
Unlike the rules of Monopoly, insurance can be a minefield at the best of times when you don’t know what you need. You could (and should) have a million and one questions running through your head about what insurance is best, what the difference between insurance types are, and what situation you need to be in to find yourself opting for particular insurance.
To help demystify the mysterious world of property insurance, here are some handy pointers on the main insurance types and when you would need them.
The main types of property insurance include:
- Buildings insurance
- Contents insurance
- Life insurance
- Income protection
- Cover extensions
- Management liability
The first one is the biggie and for a good reason; you need to have it. Buildings insurance covers everything that makes up your house from the foundations to the roof. If you’re buying a house for the first time, your mortgage provider/bank will usually offer buildings insurance themselves, but don’t take it right away.
Shop around and see if a dedicated insurance provider, rather than their third party client, can get you a better deal. You might be surprised how cheap the market can be as it gets very competitive between companies.
A house isn’t a home until you have all your things in there. But how can you protect the likes of all your appliances and electronics when an accident or unforeseen incident occurs? Contents insurance is your best bet.
Most policies will cover acts like burglaries, fire and natural events like flooding, which will damage and ruin the contents in your house. When you buy a house and get a mortgage, you might find your bank doesn’t mention contents insurance, as there is a good chance they will automatically bundle it in with your buildings insurance. Double-check that they have and see if it is cheaper to get contents insurance from another company.
There are some advantages and disadvantages you’ll want to check for as well. See if the provider puts a cap (single item limit) on the policy, in case something like your TV or laptop costs more than that and won’t be covered. Also, check if the provider will cover you for items which family members would use away from home and if they will give you accidental cover for the fateful day someone cracks and breaks their phone.
If the mortgage is under your name and you prematurely pass away, your family would need help to pay the mortgage. Life insurance tries to soften that blow by promising a lump sum of money should anything happen.
Just like contents insurance, it’s not something that is included by default when taking out insurance on a mortgage, so check that your provider will cover it.
What happens if one day you suddenly can’t pay your mortgage? Maybe you lose your job or get in an accident which prevents you from working. Income protection is there to have your back. This insurance type will cover an amount close to your income and pay accordingly.
It’s a failsafe type of insurance where if you’re paying it for years and nothing bad happens, then at least you know you won’t have struggled on it.
Best for landlords who would plan on renting out a property they either don’t intend to live in or would be used as a second property. There are several types of cover extensions out there which look at everything from HMO properties and unoccupied houses to holiday homes.
If you plan on being a landlord, shop around for a provider offering extensions as a bundle for a lower price than taking cover out individually.
Again, like cover extensions, this insurance area is mainly for landlords and people who would be renting out properties with multiple tenants.
It covers the likes of engineering, inspections and maintenance and is meant to safeguard landlords over time. For example, paying to have boilers regularly inspected and checked works in a landlord’s favour when a tenant might say a broken boiler or shower is your responsibility when wear and tear on the tenant’s end shows where the responsibility to pay lies.
You can always get a professional to help!
Pretty much every aspect of property insurance I’ve discussed in this article is something you should be able to get covered by a property management service. If you’re based in the UK like me, a company like Ross & Liddell does an excellent job of helping residential and commercial clients find the right insurance for their properties.
I recommend at least getting in touch with an advisor as they should be able to tell you what insurance is essential and where designation would fall should something come up between the landlord and tenant.
Are you interested in more tips and advice on owning or renting property?
Check out the latest real estate posts from the blog right here, including tips of concrete flooring and how to mould test before buying a property.