Becoming a landlord is a popular way to make some side income. Especially with the current low mortgage rates available, landlords who buy into the market now may realize the greatest benefits of their investment in the future, when the housing market has recovered, renters are willing to pay high rates for their property, while the landlord continues to pay the same low mortgage interest! Data provided by the National Multi Housing Council shows that over one-third of American households rent, rather than own, their dwelling. Data from the Guardian shows that similarly, about 33% of UK households are renters.
So, you have some extra cash, and you may be thinking that this is the perfect time to try your hand at renting out your own property. However, as a typical accountant, when making a decision like this, my thoughts quickly turn to the risk I might take on as a landlord. Whether buying with a loan or with cash, landlords face the risk of losing their rental property to disaster, or even a legal liability if a tenant is injured while in the rental property and decides to sue.
If you're thinking of becoming a landlord, or even if you already are one, do you know if your insurance covers the maximum amount of liability you could potentially face? You may already have an insurance policy in place, but does your insurance cover improvements that you've made to the property since taking out the policy? Does the insurance cover the plumbing and electricity in the walls of the property, or does it only cover the walls and structure of the building itself? Will the policy cover the cost to rebuild the property should it burn down in a fire, or will it only cover the price you paid for the property originally?
Before making a decision about your insurance policy, do a little research on insurance products available - chances are, insurance companies have thought of many contingencies that you may not have considered. You may decide against some types of coverage, but learn about what is available, so that you can think over what type of policy you need. For example, visiting a website like Total Landlord Insurance will provide you with a huge amount of information on the types of policies available to property-owners. Their frequently asked questions area provides answers to some of the tricky parts of insurance coverage, and makes it clear what questions you should ask your own insurance provider about your coverage - and to make sure everything you think is covered really is - before any damage occurs.