Wynand van Vuuren | Partner | Client Experience | King Price Insurance | mail me |
Protecting assets that generate rental income is vital to ensure financial security and to avoid unexpected liabilities or losses. Renting out a room, apartment or even an entire home can be a great way to earn extra income.
Renting out works best during the holiday season when bookings are more likely. Platforms like Airbnb make this process easy. However, check with your insurer before welcoming paying guests to confirm what is and isn’t covered.
Renting out a living space for income changes your risks significantly. Personal buildings and home contents insurance covers loss, damage and liability in standard situations. However, adding paying guests introduces additional risks that require specific coverage. Without proper cover, your insurer may reject claims related to these risks.
Building vs personal
Personal insurance typically covers your property and structures for loss and damage to the buildings themselves. It also includes cover for permanent fixtures like built-in stoves, cupboards, fitted carpets, light fixtures and taps.
However, insurers exclude this cover when you let or sub-let the building without visible signs of forced entry. Additionally, they may void cover for loss and damage caused by acts of nature in such cases.
Home contents
Home contents insurance covers the accidental loss or damage to everything that would fall out if you turned your home upside down.
As the owner, it’s your responsibility to insure these items if you rent out a furnished space. However, your personal insurance probably won’t cover these contents if your house is being used as a boarding house or commune.
Liability cover
Your personal buildings and home contents insurance will likely cover your responsibility for the accidental death or bodily injury of third parties. It also covers the accidental loss of, or damage to, things that belong to third parties.
Additionally, it covers legal costs that someone else may recover from you, which your insurer has agreed to, in order to settle or defend a claim against you. This is provided that the liability is linked to a valid claim under your buildings or home contents cover. These claims can run into millions of Rands, and you may be personally liable for them if you don’t have the correct insurance.
The thing is, when you receive income for something, you’re essentially running a business. This means that you need specialised cover from your insurer. Even if you just rent out a ‘granny flat’ on your property, it’s worth confirming with your insurer that you’re covered for all potential risks.
Related FAQS: Rental income insurance
Q: What is rental income insurance?
A: Rental income insurance is designed to protect landlords from loss of rental income from various circumstances, such as tenant eviction or property damage that prevents tenants from occupying the rental property.
Q: Do I need rental insurance if I am a landlord?
A: Yes, having rental insurance is essential for landlords as it provides peace of mind and financial protection against potential losses associated with rental properties.
Q: How does rental income insurance help landlords?
A: Rental income insurance helps landlords by covering lost rental income even if your tenant is unable to pay rent due to eviction or other issues, ensuring that property owners maintain their income stream.
Q: What does landlord insurance typically cover?
A: Landlord insurance typically covers property damage, loss of rental income due to tenant eviction, legal fees related to lease enforcement and other liabilities associated with rental properties.
Q: Can I get insurance cover for property damage?
A: Yes, building insurance is available to cover property damage. This insurance solution can be bundled with rental income insurance for comprehensive protection.
Q: What should I consider when choosing a rental insurance policy?
A: When selecting a rental insurance policy, consider the premium, coverage limits, the types of losses covered and whether it includes protection against defaulting tenants and legal fees for eviction processes.
Q: What happens if my tenant goes into arrears?
A: If your tenant goes into arrears, rental income insurance can help safeguard your rental income by providing compensation for lost rental payments during the eviction process or tenant default.
Q: How can I evict a tenant if they default on their lease?
A: To evict a tenant who has defaulted on their lease, you must follow legal procedures outlined in the lease agreement and local laws. Having landlord insurance can help cover the legal fees associated with the eviction process.
Q: Is rental income insurance worth the investment?
A: Yes, for many property owners, rental income insurance is worth the investment as it protects against potential financial losses and provides peace of mind knowing that there is an insurance cover in place for unexpected situations.
