Insurance is an area that every individual involved in property (particularly as a business) should think very carefully about. The type of insurance that usually applies when it comes to property investing tends to be mainly landlord insurance and limited company liability insurance. But there are others too - depending on the location of your properties (i.e. flood insurance for coastal properties). We’ll go on to explain some of the popular types of property business-related insurance in this blog post.
Insurance may seem like another added expense you could really do without when starting out with your property business. But try and see it as a necessity. That’s because failure to take out the proper cover could result in financial ruin for you and your business, and prove catastrophic for your family. It could even result in you losing your home.
You could, for instance, be sued by a client or tenant and lose (even going to court in itself can prove financially hefty). Another heavy financial penalty could be if one of your properties is badly damaged to the extent it is uninhabitable for a lengthy period of time. Then again, too many void periods with buy to let properties might throw your finances into the red, causing you to take out more loans and plunging you further into debt.
● If you own at least one buy to let property, then you’ll need a form of landlord insurance. Certainly, Buildings insurance is important since it covers you in the event your property is damaged by a storm, a fire or subsidence etc. If you’re in a designated flooding area, then you’ll need extra protection to cover this.
● Landlord liability insurance is needed in the event that one of your tenants – or a guest – injures themselves in your flat because there was, for instance, falling plaster, or uneven floorboards. You could be ordered by a court to pay compensation (and you’d also have legal fees).
● Insurance for void periods means you won’t lose out on any income if the flat is untenanted for a short while. You can also have loss of income cover, where the flat is untenanted due to the flat being temporarily uninhabitable.
Property investor insurance
● If you are an investor in a limited company who advises clients on particular properties, then there is specific insurance that applies. Professional Indemnity Insurance is important because it covers you against a client making a professional negligence claim against you.
● Income Protection Insurance is similar to landlord’s loss of income or void periods insurance. Having this means you will still receive an income if you become ill and are unable to work for a period.
● If, in your limited company, you employ a researcher, secretary or some other type of causal staff on a temporary or part-time basis (and who isn’t a member of your family), then you will be legally obliged to take out Employers’ Liability Insurance. It is a means of covering yourself, should that staff member be injured at work.
Landlords don’t require any specific insurance to be compliant (but it makes sense to have Buildings Insurance – not least because it can be almost impossible to get a mortgage without it). A property business registered as a limited company and with one or more employees needs Employers Liability Insurance to remain within the law. But Professional Indemnity Insurance would also be a good idea.
If you’re unsure about what insurance to get for your property business, then do get in touch with the team here at Sourced for advice. We’d be happy to help!
Speak to Jan Murray who specialises in investment property.
Call 0333 123 1330