Property insurance

Property Investing is a Risky Business

All savvy property investors are aware of the potential risks of property investment. However, how many of these investors have considered what will happen, if their investment goes up in smoke, quite literally? Insurance is often ignored, but do so at your own peril.

Property Insurance Having found your perfect property, whether in the UK or abroad, got your nice reliable tenants into the property and having it managed seamlessly be a reliable letting agent, you may think that nothing can cause a hitch in your grand plan. Wrong! Have you considered what would happen, if your property was involved in a bad fire? Or a flood? Or even a burglary that causes substantial damage? Foreign Property Foreign investors, in particular, are prone to having inadequate insurance coverage. Editor of Property Investor News, Richard Bowser, warns: Failing to get the right insurance cover is just one of the many mistakes that amateur investors make. Unfortunately, common sense often goes out of the window with the first glass of foreign beer'. Understanding the insurance that you require and what it covers you for is vital if you are not going to have a nasty shock, in the event of a claim. For example, if you own a property abroad, you may find that it is being let as a holiday home through your agent and is, therefore, vacant for long periods, during the low season. It is vital that you make sure that the insurance company covers these periods. Whilst most insurers will be willing to offer this service, almost all will insist that you take certain actions to minimize risks, such as turning off the water and ensuring adequate security measures. Another important thing to consider is what exactly you are responsible for and what your agent is responsible for. Many investors have been caught out by believing that the agent's fees also cover insurance. Even if your agent does offer insurance, it may not be to the extent that you would want. Always obtain a copy of all policies in writing, so that you can be 100 percent certain that you are covered. Consider the facility that your insurer offers. If you own a property that is offered as a holiday let, then even a few days of un-inhabitability can be extremely costly. Does the insurer offer a 24-hour helpline and will it cover lost rental income for any down' period? If you have a property abroad and you decide to obtain local insurance, pay particular attention to what is covered and what is not. For example, in the UK we take for granted that subsidence is covered in buildings' insurance; this is not always the case, overseas. A particular sticking point in France, Spain and the United States is the concept of ‘community insurance' which covers the entire apartment block but is normally restricted to the communal areas and would not include problems within your individual flat. UK Property If you own a UK property which you let to one tenant, on a more long-term basis, you may think that your troubles are over. Whilst many of the issues that surround foreign property do not arise, in the case of UK property, there are still a few issues that should be considered. When using an agent, it is important to know exactly what aspects of insurance cover the agent has in place and what is not included. It is not common practice for an agents in the UK to offer insurance for the properties that they let; however, you should always ask the question, as double insurance is not only costly, it may render one or both policies void. Most tenants and student tenants, in particular, will only obtain contents insurance, as this is the only part of the property with which they are particularly concerned. Always make it clear in your lease exactly what level of insurance that you expect your tenant to obtain. This is particularly important with furnished accommodation as, again, you may find yourself in the position where your tenant thought you had obtained insurance and you believed that the tenant had obtained insurance. Take time to consider the importance of insurance and what your policy does or does not cover. Unfortunately, all too often, investors overlook this vital aspect of property owning until it is too late. For more information on insuring your investment take a look at the following sites: www.landlordzone.co.uk www.1st-business-insurance.co.uk www.arla.co.uk

Posted in Articles from 2007

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