Becoming a landlord is becoming increasingly popular due to the rise of businesses such as Airbnb, which can assist you in stretching your income by renting out a room or a property.
Before you hand over your front door key, you as the landlord should understand your risks, take steps to mitigate them and be aware of the risks you do not have cover for.
Tell your insurer if you are letting out multiple homes or if you have frequent short-stay paying guests, as they may decide that the risks have to be insured on a business policy instead of a personal policy.
Five tips for renting out property:
1. Do your research: Choose your tenants carefully by checking guest reviews and asking for appropriate documentation.
2. Guard against identity theft: Destroy documents that contain personal information, such as bills – don’t leave them around for your tenant to view. Lock away passports, IDs, marriage and birth certificates.
3. Improve your security: Install security measures such as alarms, electric fencing, security gates, additional locks and deadlocks. These improved security measures will mean you pay less for insurance and your home is safer.
4. Make your home disaster resistant: Implementing safety checks before you rent out your property will reduce your risk of ending up with an injury liability. Check indoor gas appliances – service and maintain fixed gas appliances; install smoke detection alarms and fire extinguishers in the home; keep tight-fitting screens in front of the fire place; clear chimneys regularly and check the cords on electrical appliances to make sure they are not frayed.
5. Lock away valuables: This includes jewellery, special ornaments, breakables, candle sticks and valuable cutlery and crockery.
As a landlord you have the following risks that might not be insured:
- Liability for injury to lessees and their guests because of an unsafe condition of the residence (a loose carpet for example) – possibly covered.
- Theft of your possessions by the tenant or guest – most insurers automatically limit cover to forcible and violent entry or exclude theft by tenants.
- Theft by others because the tenant or guest did not lock up or set the alarm properly – normally excluded.
- Identity theft – most policies do not cover loss caused by this.
Check with your insurer which of the above risks are covered and whether or not you can purchase an extension where there is no cover.
To help minimise your exposures, make sure you have a standard lease agreement be drawn up by your attorney to make the lessee responsible for all theft. You also need to point out any potentially unsafe defects to the lessee. Do this in writing if possible so you can prove you advised them if they want to sue.
*Gari Dombo is MD of Alexander Forbes Insurance.