Investing in buy-to-let property, or renting out a holiday villa, has become a popular avenue for individuals looking to invest for their future; yet while this provides an attractive revenue stream, it is critical that such an asset is properly protected to mitigate the financial risks.
According to Lizette Erasmus, head of insurance services at IntegriSure, there are certain stipulations that need to be adhered to when you rent out a property to ensure an insurance claim can be submitted successfully.
“If your insurance policy does not stipulate that your property will be rented out for periods of time, then theft of items or damages may not be covered. In many instances where tenants have stolen valuables like televisions and microwaves, the owners find themselves out of pocket and without any insurance because they were never properly advised,” says Erasmus.
It is important that your financial adviser be informed of such arrangements to establish if this would be covered in terms of your personal householder’s policy.
She notes that another common occurrence with holiday homes is that of malicious damage, such as vandalism to the property.
“It is therefore of the utmost importance that individuals are properly advised and covered to ensure that they are able to repair or replace items, should anything happen to the property. Holidaymakers easily justify their actions by thinking that any possible damages are covered in the rental fee paid for their stay.”
Inform your financial adviser of any change in your risk such as the fact that your property will be unoccupied for more than two months, that the property is being let, or if building alterations are taking place.
Erasmus provides the following advice for anyone considering renting out their property.
- Make sure that you acquire all valid details of your prospective tenant/s;
- Choose your prospective tenant/s carefully. Often this means screening them – references, vehicle details and IDs;
- Ensure the full payment is made upfront, not on arrival;
- Have everything in writing – a written lease agreement that documents all of the necessary facts concerning your relationship with your tenants, and
- Keep an updated inventory of your home’s contents.
“It is advisable that you also ensure that your policy provides cover in terms of loss or damage due to an accidental event such as dropping a television set or damages caused by things like power surges. In many instances this would be a cover option that should be requested specifically.
“Renting out a property or holiday home can provide a lucrative income, but it is vital for anyone considering doing so to speak to their financial adviser to understand the potential insurance risks and make sure they are comprehensively covered to avoid any financial headaches down the line,” says Erasmus.