Buy to let insurance
Once you have let your property you are in the hands of your tenant. Even the mildest-mannered of them seem to be capable of inflicting untold damage, and often your security deposit will not cover the costs of putting things back into a rentable condition.
Even though it is unlikely (but not impossible) that a tenant will actually destroy your property completely, all lenders require that properties subject to a mortgage are covered by buy to let insurance. In the event of a fire or other cataclysm the cost of rebuilding will be met, and your investment - and the lender's - will be safe.
A Couple of companies that offer insurance for Landlords and tenants are Homelet and Letsure
Taking out contents insurance is also very advisable. We've all heard horror stories about the depradations inflicted on rental properties by tenants: holes a foot wide appearing in the wall following an abortive attempt to hang a picture; furniture set ablaze by stray cigarettes; toilet bowls smashed by inebriated tenants falling over them; and so on.
The money involved in carrying out repairs and replacing damaged items is only part of the picture: there is also a strong possibility that the house will have to remain empty, losing you vital revenue, while repairs are carried out.
Luckily several insurers offer policies specifically intended for landlords that go beyond normal contents insurance. Some offer up to a year's protection against rent arrears, as well as cover for legal fees incurred in respect of the property. And some will even pay you half the monthly for up to three months after the property is vacated or until a new tenant moves in.
Homelet - HomeLet provides a range of insurance and other related products for the residential letting industry. These include a specialist landlord scheme that is specifically designed for the particular risks facing landlords and a comprehensive tenant policy which includes cover for the risks associated to those who do not own the property where they live
Letsure - Letsure offer landlords specialist cover and advice to help protect their investment against any unexpected risks they may face when letting.
Buy to let life mortgage life insurance
The need for life insurance to cover investment property is, on the face of it, not so pressing: provided your own home is properly covered, no-one will be made homeless if you die before the mortgage is paid off.
However, there is a strong likelihood that whatever capital you have invested in the property may be eaten up by legal bills and other costs if the worst were to happen. On top of this would be the potential for legal and financial difficulties which - in the circumstances - you may prefer not to leave your dependants to deal with.
So there is a good case for protecting your investment by extending your life cover to meet the costs of repaying your buy to let mortgages.
If you take out an ISA- or pension-backed interest only mortgage lenders may actually require that you are adequately covered by insurance, since otherwise they cannot be certain of reclaiming the capital amount of your loan in the event of your death.
An alternative to taking out life insurance would be to consider setting up an interest only mortgage in combination with an endowment policy, which includes an element of life insurance in its cost. Provided these policies are regularly monitored they can still be a reasonably safe way of saving to pay off your capital sum.
If, on the other hand, you opt for a repayment mortgage, you can benefit from a mortgage protection policy. The level of cover provided by such a policy will decrease over the term of your mortgage to keep pace with the decreasing amount outstanding. As a result, the premiums are usually lower than for an equivalent "level term" mortgage, which pays out the full value of the policy if you die at any point during its term. This sort of policy is necessary to cover repayment of the capital sum in an interest only mortgage.
Taking out life insurance for the term of the mortgage on your main residence is a very sensible step, particularly if you have dependants who might otherwise be left without a home in the event of your death.
The need for life insurance to cover investment property is, on the face of it, not so pressing: provided your own home is properly covered, no-one will be made homeless if you die before the mortgage is paid off. However, there is a strong likelihood that whatever capital you have invested in the property may be eaten up by legal bills and other costs if the worst were to happen. On top of this would be the potential for legal and financial difficulties which - in the circumstances - you may prefer not to leave your dependants to deal with. So there is a good case for protecting your investment by extending your life cover to meet the costs of repaying your buy to let mortgages.
