Housing is by far one of the most precious properties in Spanish households and one of their main investments. Currently, the rental market for flats is growing at a good pace, especially in large cities, with a profitability that far exceeds that offered by banks with their deposits.
In this sense, there is Home Insurance with which a landlord can protect the investment in his rental property, with coverage such as the Rent Default Insurance and other interesting guarantees. Today we tell you how to insure a house for rent.
Buying to rent, now that the rental housing market has become interesting, has become an option for many owners who decide to bet on renting homes to get more out of their money.
The latest data from the Bank of Spain indicate that the average gross return on a rental property in the main Spanish cities can exceed 6%. The expenses and taxes involved in maintaining a house reduce the return to around 4%, but this return is much higher than any time deposit.
In addition, a closed house costs money and ends up deteriorating over time, so it does not seem a bad idea to find a tenant who can cover expenses and make the property profitable.
Rental risks for owners
But all that glitters is not gold. When renting a house, we must not forget the risks that rental apartments have for their owners, because they can be very expensive.
The uncertainty of the owners in front of the possible damages that irresponsible tenants can cause in their housing, makes many owners back down when it comes to putting a flat or a second home for rent. However, the biggest risk for landlords is finding a tenant who fails to pay rent, with the disruption and cost that these processes entail.
And not only that: when we put a house for rent we always expose ourselves to the risks inherent in the use of the property. There is no need for our tenant to breach the contract or cause damage.
All types of domestic accidents and small incidents that can cause damage to furniture or installations occur in houses. Likewise, we must take into account the damage that the rented property can generate in neighbouring flats due to an occasional accident.
Insurance for renting a property
Multi-Risk Home Insurance can provide interesting solutions when insuring rental homes. In fact, there are insurances on the market designed to rent a house that incorporate coverage tailored to these houses.
The insurance companies that market Multi-Risk Home Insurance have been launching policies on the market for some time now that are designed to insure rental homes, with cover that is typical of any Home Insurance and other more specific cover, designed for these homes.
However, it is important to note that we buy policies for rental homes from insurance brokers or insurance companies, because not all rental insurance is the same, as we tell you in this post.
We are talking about insurance products that, on the one hand, guarantee the protection of the owners and, also, contemplate insurance for the tenants. Because, in the Rental Insurance not only the owner of the flat has reasons to hire a policy, as we will see later.
Is Home Insurance mandatory in a rental?
In a rented property, taking out a Home Insurance is not compulsory, but it is recommended. Nobody forces us to insure a rented flat, but common sense invites us to take some precautions to cover possible damages in the rented house. And taking out Renters Insurance, along with the basic coverages of a Home policy, can be a very reasonable option.
For the homeowner, damage to the home can undermine his investment and lead to unforeseen expenses. Not to mention the cost of having the house occupied by tenants who neither pay nor let the house be rented again.
In addition, the tenant who uses the house may have to pay for damage to the property with the deposit or pay for repairs to appliances or fixtures out of pocket, as agreed in the rental agreement.
With a Homeowner’s policy, the Insurance can take care of these expenses and save the landlord and tenant more than a few headaches.
If you are wondering how much Renters Insurance costs, with all the necessary coverage to cover a rented property, we can help you get interesting discounts on the policy. We have very cheap Home Insurance prices for rental houses in our online Insurance comparator.
In addition, you can consult our online brokerage team about the most appropriate guarantees to insure a home with a tenant. However, here is a summary of some of the most important guarantees you can include in these contracts.
Insurance Coverage for Rental Housing
A house, even if it is intended to be rented, is an important part of the family’s assets. That is why it is advisable to insure the rented flat or house to cover any damage that may occur to the property while the tenant lives there.
It is advisable to have Multi-Risk Home Insurance that covers at least the building (the value of the home itself). If the home is furnished, it is advisable to insure the building and its contents (furniture, appliances and other objects in the home). However, the tenant must take out his own insurance if he wants his belongings to be protected.
Civil Liability coverage is also important, because the owner may be forced to respond for damages caused by the tenant.
The Insurance of the Continent
The container of a house refers to the constructive and structural elements of the house, such as the walls, floors, installation of electricity, pipes, etc.
Thus, Building Insurance on a rented house covers the costs of rebuilding the house and its installations, as well as repairs to damage caused by a claim that affects the structural elements of the building.
If you have any doubts about this coverage, in our blog we tell you more about how to insure the building of a house.
Content coverage
The content of the house is the set of furniture, appliances and other accessories that are inside the house. When insuring the contents of a rented flat, the insurer guarantees, with a capital established in the policy, the damage or loss that the contents may suffer as a result of a claim.
In this respect, it is advisable to carefully evaluate the real value of the household goods and appliances in the house and not to fall short when insuring the contents of the home.
In Home Insurance, whether for a private home or a rented flat, falling short when calculating the value of the contents in the policy, makes us fall into a situation of under-insurance.
This means that the insured value is less than the real value of the elements that make up the contents of the house. The consequence of under-insurance would be that we would suffer when we had a claim, as the insurer, upon realising the situation, would apply the rule of equity to us and the compensation would not be sufficient to cover the elements that had been lost.
On the other hand, if we overestimate these elements, a situation of overinsurance is prudent, which results in uselessly paying more expensive premiums, since in any case the insurer will only compensate for the value of the asset.
As you can see, it is important to adjust the value of the contents well when insuring a house for rent. In this respect, you may find this post useful with tips for calculating the value of the contents of a house.
Liability Insurance in Rental Housing Insurance
This refers to damages that may be suffered by third parties due to accidents that occur in the rented house. The most common of all is the typical water leakage that produces a leak in the neighbouring flat. In these cases, the Civil Responsibility Insurance of the rented house covers the repairs or compensations generated by these damages.
This coverage is important, since in the event of damage to third parties by the tenant, such as landlords of the rented property, the owner is responsible and would have to assume the costs of the repair or compensation if he or she did not have insurance.