Landlord Insurance
These are the musings of an insurance man, who would like to put some of his hard earned cash into buying cheap properties and become a landlord. These hard times have made everyone look at their outgoings. In the insurance industry we have seen lots of people looking for cheap insurance. I have decided to look for cheap properties.
It seems to me that – given where we are in the economic cycle – property might suit me as an investment. I have, in the past put all my eggs in one basket, only to find that someone dropped the basket, and all my eggs broke in one fell swoop. There are lots of discounts available to people willing to invest, and interest rates are low… What could possibly go wrong, I ask myself.
Well the truth is that quite a lot can go wrong. The first is that property prices fall, and my investment de-values. Over the long term, I think that is a risk I am willing to take. More immediately, though, I could encounter the issues that many landlords encounter – tenants defaulting on rent, damage to my furniture, damage to the property, an awful accident leading to me being sued by my tenant, famine, a plague of locust – maybe I’m letting my imagination run wild now!
The truth is that with the appropriate insurances, all of those fears (except, perhaps the locust) can be wiped out with insurance. All I have to do is call my local insurance broker, and for a very reasonable premium he will sort out Landlords Insurance for me, which will cover me for accidental damage, liability, and non-payment of rent.
Of these policies, it is the rent guarantee policy that most interested me. It felt obvious that I could buy landlords insurance cover for damage and liability, but a property owners insurance that covered defaulting tenants feels like a great addition.
I am told that the way rent guarantee insurance works is similar to credit insurance. The insurance company makes a judgement on the likelihood of a tenant to default, and then, for a premium, takes the risk of such a default. It is me – the property owner – that is insured, not the tenant, so if I need to make a claim, I will be paid directly by the insurer.
It feels like I have convinced myself. I am going to take the plunge and have a look for some cheap property. I will try to find a good area, but most important of all, I will buy proper landlords insurance, and be a relaxed property owner.
