So you have decided to rent out a second property and decided to add all the furnishings therein to the agreement. Truth of the matter is, many renters these days choose to rent fully furnished properties to save on cost, including insurance. As an investment property owner however, the need to have landlord contents insurance is a must-have. But what begs an answer, which has often caught many landlords off-guard, is the question: how much should you insure?
Important Aspects in Landlord Contents Insurance
If your rental property burned down or its contents were burglarized, a specially crafted landlord insurance policy will ultimately cover your cost. This is even more so to fully furnished rental properties where the level of risk can be higher in areas where theft or natural disaster is commonplace. Other aspects like accidental and malicious damage to property like furnishings and fixtures must also be taken into account.
So what are the important features and benefits in landlord contents insurance policy? When thinking of comparing quotes from various insurers or brokers in the area, it is imperative to check on these items:
- “new-for-old” coverage or complete replacement for damaged items without taking depreciation into account
- loss or rent
- temporary removal of contents
- emergency assistance
- lock replacement
- sprinkler system replacement
- cover for accidental damage from insured peril, e.g., loss of metered water or gas
- liability cover (refer to new legislation)
- garden contents cover, if any
In some cases, central heating system coverage may also be taken into account as this system can easily succumb to unexpected breakdown or failure. But while these aspects may be clearly stated on your policy, it is imperative to check what the landlord contents insurance policy carries, actual cash value or replacement cost?
Cash vs. Guaranteed Replacement Coverage
When analysing “how much” to insure in terms of rental property contents, landlords are often advised to go for guaranteed replacement rather than cash valuation. Over the years, a lot of improvements are being done to homes, apartments and even to commercial complexes not usually mentioned on the pre-signed insurance policy covering a particular span of time. Often, landlords do not take these improvements to rental property contents to mind up until something of dire consequences happens.
According to experts, most landlords usually peg their contents insurance according to current face value. By getting into cash valuation, they may even face a far greater risk of facing huge depreciation on such contents. When things go awry, these landlords may face a huge risk of underinsurance. Actual cash value coverage is not in the same league as replacement cost coverage. The former simply reimburses landlords for the items total value less depreciation. The latter, on the other hand, allows replacement of destroyed property with new ones.
In A Nutshell
The question of cost on landlord contents insurance should not focus on the premium involved or the market value of such properties. Reliable insurers and insurance brokers strongly recommend guaranteed replacement coverage as a way to counter any unforeseen damage, malicious or otherwise, to your rental property’s contents. The premium to such insurance policy may be higher than usual but definitely, the mantle of protection it offers will compensate for such.