To give you peace of mind when letting your property, it’s best to reduce the risk of unexpected expenses as much as possible. That’s why it’s essential you have the right insurance policies. Yet which types of insurance are the most important and what do you need to be particularly careful of? Floris van Dam, owner of Jac. van Dam Verzekeringen and an expert in general insurance, has written a blog on the subject.
The two most important types of insurance for let properties are Buildings insurance and Liability insurance.
In the case of let properties it’s up to the landlord to take out buildings insurance. However, there are a couple of points you need to be aware of when arranging this type of insurance for let properties compared to a property you live in yourself.
Commercial properties must have buildings insurance that clearly states the property is to be let. This isn’t a problem for business owners but can be for owners who privately purchase a residential property. Many insurers in the Netherlands simply do not offer the option of registering let properties. Insurers view let properties as a bigger risk than owner-occupied properties. You therefore need to check in advance with your current buildings insurance provider whether this can be altered.
Many insurers will refuse to pay compensation for damage or loss relating to a let property that is still registered as owner-occupied. This of course means a huge financial loss for the owner. Letting rooms is viewed as an even bigger risk. It’s almost impossible to arrange proper insurance for this nowadays. If you’re considering doing this, I recommend you talk to an insurance expert at an early stage.
It may sound odd, but your (let) property can also cause damage or loss to third parties. Examples include falling roof tiles or a bannister coming loose while someone’s mounting the stairs. For such cases it’s a good idea to arrange a “business liability insurance policy for let properties”. As long as the claims are covered by the insurance, the injured parties can receive compensation in the event of damage to property or personal injury. A successful claim always requires a wrongful act on the part of the landlord (e.g. poor maintenance).
Compensation will also be refused under the Liability insurance policy for any damage or loss relating to a let property that is only registered as owner-occupied (and therefore not as let) due to the difference in use.
Letting furnished residential properties
If you’re letting your residential property furnished, it’s also possible to insure the household contents via an inventory and goods insurance policy. It’s worth noting here that this type of policy often only covers natural disasters, fire, theft (following a break-in), water damage etc. It doesn’t cover damage or loss caused by the tenant. Depreciation also applies in the case of older household contents and is taken into account when paying compensation. It’s therefore worth considering whether the risk/current market value of the household contents is high enough to justify insuring them.
A practical example
The importance of proper insurance for let properties can be seen from a case a few years ago in which an electrical appliance short circuited and caused widespread soot damage to a let apartment belonging to a client. The entire flat was blackened by soot and made uninhabitable. The tenants were immediately given alternative accommodation and a Salvage team was hired to clean the apartment. This entails all the pots and pans, tables, chairs and cupboards being wiped down to remove the soot. The process is hugely time-consuming and took about two weeks. The total damage to the apartment amounted to about €25,000 and the Salvage team’s work cost a further €10,000. This demonstrates that it doesn’t even need to be a destructive fire and that a simple short circuit can cause an enormous amount of damage as well. Maintenance of electrical and heating systems is often the responsibility of the landlord, but it also makes sense to check the electrical appliances a tenant brings into the property.
Interhouse letting agents and Interhouse property management have worked closely with Jac. van Dam Verzekeringen for many years. This guarantees that risks are insured as much as possible and allows them to put clients in touch with a true specialist.
Please don’t hesitate to contact me if you have any questions after reading this blog or if you’re interested in conducting a detailed review of your property’s insurance policies.