How familiar are you with the main risks and types of insurance that exist in relation to rental properties? Lettings are quite a large segment of the property market and whether you are involved as a landlord or a tenant, having the right insurance in place and set up is a key issue for both parties. There are several types of insurance and we will briefly introduce them here, outlining their main features and pitfalls.

First and foremost, it is essential to properly understand the principles of how these different types of insurance are designed, i.e. what they cover and what they do not. Below, for basic orientation, we summarise a simplified definition from the perspective of the person taking out the insurance:

  1)    Property insurance: my property, building/structure, caused by an event or external factor

  2)    Home insurance: my property, equipment/furniture, caused by an event or external factor

  3)    Liability insurance: someone else's property or health, caused by me

We will discuss each type in a little more detail below. 

Property insurance

It is taken out by the landlord (owner) of the property in question to protect the value of his property in the form of the building of the house itself or the structure of the apartment in the event of damage. The policy covers cases where the damage arises from a sudden event and is therefore not caused by the owner himself. It can either arise from an external influence such as bad weather damaging the roof or anything on the building (structure) in question, or it can be an event arising from the use of the property in question, where for example there is a failure in the seal of a kitchen tap and leaking water damages walls, paintwork, floors, etc.

Some policies on the market cover the fixed components of the flat or house in addition to the structure itself. These typically include the kitchen or built-in cabinets.

Home insurance

Is taken out by the owner of the subject property that the home is equipped with - for example, furniture or electronics, but also clothing, sports equipment, crockery, and so on. Similar to a property insurance policy, it does not cover damage to the owner's (my) property caused by the owner himself (me). I can therefore only claim cover for damage arising from a sudden event, such as fire from a shorted kettle, atmospheric precipitation through an open window, theft, and so on.

Liability insurance

In addition to the insurance of one's own property (real estate, household), there is a liability insurance for damage caused to property or health of a third party, the so-called "liability". In the context of renting, the event of damage to the property or household caused not by an event but by a NON-OWNING person - in this case the tenant - is covered by liability and cannot be covered by property or household insurance.

In the context of rentals, it is good to remember a fundamental fact that applies to most liability insurance currently offered in our market: the landlord's property technically becomes the tenant's property for the duration of the rental, from an insurance coverage perspective. It follows that damage to this property caused by the tenant himself falls under the exclusions and therefore cannot be covered by liability insurance, as this by definition covers damage exclusively to OTHER property or health. Therefore, anyone acting in any role within a tenancy is advised to inform themselves of the insurance terms and exclusions, ideally before entering into a binding tenancy agreement and exposing themselves to potentially unwanted risks. We can also advise any landlord to commit the tenant in the lease to have adequate liability insurance in place for the duration of the lease and to inform the landlord immediately of any change to that policy.

Finally

If you are interested in this topic and are currently dealing with a planned or ongoing lease of your property, or are an existing or prospective tenant, you can learn more and, more importantly, better protect your interests. We are happy to provide you with expert advice in the field of real estate or finance. We are also able to offer and provide a comprehensive property care service to landlords, saving them valuable time, their energy and costs.