select
|

Important insurance issues for landlords

If you are still paying off the bond on your rental property, you will also be paying a monthly or annual premium for home owner’s insurance – also known as HOC – which covers you against damages to the structure that may be caused by flooding, fire, wind, hail or other natural disasters.

Most banks will not approve any home loan without such insurance, but if you have a standard HOC policy, whether it is from the bank itself or from an independent provider, it may not actually cover you against damages that occur when the property is occupied by a tenant or standing empty.

It also may not cover you against loss of rental when the property cannot be occupied because it has been too damaged.

“You need to check the terms of your policy and make sure that the insurer knows the property is being let and is not owner-occupied,” says Greg Harris, CEO of Chas Everitt Rental Properties. “This may affect your premium but paying a little more is better than finding out after a disaster has struck that your cover is not valid at all.

“In addition, you need to check whether there is a provision preventing you from letting to a certain category of tenant, such as students, for example, or multiple single tenants, as in a commune.”

Then if that is all in order, he says, you must make sure that the sum insured represents the full replacement cost of the property, not its market value, which is likely to be considerably lower.

“Both property values and replacement costs rise over time and it is your responsibility to ensure that your insurance keeps pace with these changes – and that you keep up the HOC on the property even after the bond is paid off.”

Harris says things get even more complicated if your rental property is in a sectional title scheme, because in that case the HOC for the whole building or complex will be jointly paid by all the members of the body corporate, out of the monthly levies they all pay.

“You will need to be especially careful in such an instance not to invalidate the HOC that covers everyone else’s properties as well as your own, and to ensure that the replacement value is regularly adjusted even if it means an increase in the levies.” 

He says there are also several other important insurance issues for landlords to be aware of, including the following:

·         Household contents that belong to your tenants must be insured by them – you are not responsible for any damage or theft of their goods.

·         If you are letting the property furnished, however, you will need to take out a separate household contents policy to cover whatever furniture and equipment belongs to you.

And finally, says Harris, you should really have a specific insurance policy that covers you against the loss of rent and/ or utility payments due to a tenant defaulting, as well as the legal costs of getting such a tenant evicted.

“You can obtain such a policy through a reputable managing agent such as Chas Everitt Property Rentals and it is really worth it for the peace of mind it will give you.”

 


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 19 Jan 2018
      Extending from Randfontein in the west to Roodepoort in the east and including the towns of Krugersdorp and Magaliesburg, the West Rand has a plethora of property available to residents who choose to make this unique area their home.
    • 19 Jan 2018
      When it comes to financial planning, doing the work to ensure you’re prepared for unexpected emergencies is just as important as ticking off your other goals and New Year’s resolutions. The beginning of the year is also the perfect time to review your various insurance policies.
    • 19 Jan 2018
      No surprises at the first Monetary Policy Committee of 2018, as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would stay at their current levels.
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
    • 18 Jan 2018
      New year, new goals! If you’ve resolved to purchase your first property in 2018, then this 6-step guide from the Rawson Property Group is a must-read. It will help you navigate and simplify what is often be seen as a confusing process of buying your first home – right from the house-hunt to the house-warming.
    • 17 Jan 2018
      While the current property market may still favour buyers, it doesn’t mean that they shouldn’t be well prepared before putting in an offer to purchase.
    • 17 Jan 2018
      Lightstone lists Blair Atholl as the most expensive suburb with an average house price of R11.2 million, followed by Westcliff (R10.5 million), Dunkeld (R9.3 million), Sandhurst (R9.1 million) and Inanda (R7.2 million).
    • 17 Jan 2018
      As it currently stands, there are four main ways in which a home can be bought in South Africa, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who adds that deciding in which legal entity to purchase the property is not a decision that should be entered into lightly, as each has its pros and cons.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK