PROPERTY | SPECIAL
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BE ASSURED … AND INSURED RUPERT SMITH OF COMPLETE RPI GIVES A FULL OVERVIEW OF INSURING YOUR UK PROPERTY.
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elcome to my latest article discussing the hot topic of residential property investment, letting, management and sale in the United Kingdom. Please take a look at the HK Golfer website to access all previous articles on the subject. My name is Rupert Smith and I am the founding director of Complete Residential Property Investments Ltd (hereinafter CRPI). We are a specialist property investment company offering a unique and results-orientated commercial approach to UK property Investment. Established in April 2001 I have built up the business based upon a results-orientated commercial approach to the ownership of UK residential investment property. The topic of discussion in this issue is that of insurance, and like all insurance this always seems expensive until such time it is actually required and then invariably it seems cheap! In my experience this area is one that amazingly seems to be forgotten and rears its ugly head when it’s too late … most property managers in the UK are not licenced to sell insurance products unless they are registered to do so and the topic seems to fall into the abyss. PROTECTING YOUR INVESTMENT For clarity sake most owners of investment property perceive that the property is insured through payment of Block Service Charge in an apartment building, which is not always the case. Generally this policy would insure the fabric of the overall building, not your specific property. BUILDINGS INSURANCE Buildings insurance covers damage to the actual structure of your home, such as the roof, walls, floors, ceilings and foundations. For example, if your house is destroyed or rendered uninhabitable, you can claim the cost to rebuild or carry out the necessary repairs. Normally, you will also be able to claim the cost of alternative accommodation while the rebuilding work is undertaken, as well as any legal costs arising from damage to your home. Buildings insurance may also include outbuildings such as sheds or garages. Importantly, you should always ensure that there is proper insurance in place from the moment you become responsible for the premises, even if this is before moving in. Typically, buildings insurance covers: • • • • •
Subsidence of the foundations of your home Damage by falling objects such as trees, aerials, aircraft parts Collision damage, e.g. if someone drives into your home Burst pipes, tanks, damaged boilers and floods Damage caused during a civil riot
In some cases, you can make smaller claims on your policy for damage caused by less destructive means, including smoke and broken windows. However, the policy will not 82
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cover basic wear and tear and may exclude certain events such as damage caused by terrorism. These exclusions vary from policy to policy and between the various insurance companies. It is always worth checking the policy details so that you know the risks you are not insured against. If you have a mortgage, your lender will insist that you have buildings insurance. If you don’t, it is usually advisable to have buildings insurance anyway to protect yourself. HOW MUCH BUILDINGS INSURANCE DO I NEED? The level of insurance you arrange should be enough to cover the total rebuilding of the premises. However, the rebuilding cost of a building is not the same as its market value. Depending upon the type of property, the rebuilding cost could be more or less than the property valuation were it for sale. You can find out the value from a recent mortgage survey, or by paying a surveyor to carry out a rebuilding estimate survey. If your property is very valuable or is a listed building, it is certainly worth obtaining a professional valuation first. Most insurance companies ‘index link’ the level of their cover year on year. This means that the amount of cover offered by the policy will keep up with inflation, although premiums also tend to go up annually. It is wise to fully review your policy every two or three years to ensure that the cover remains adequate for your needs. DO I HAVE TO TAKE OUT BUILDINGS INSURANCE WITH MY MORTGAGE LENDER? Most lenders make it a requirement of your mortgage advance that you take out a buildings insurance policy to protect your property from damage, and many will offer their own policy at the time you take out the mortgage. However, there is no guarantee that your mortgage lender will offer the most comprehensive policy, so you should always consider finding an alternative. Differences between policies include: HKGOLFER.COM
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Accidental damage. This may simply cover broken door glass or extend to damage to all the fixtures and fittings in your home The policy excess. This is where you agree to be responsible for the initial part of any claim for damage. The more you agree to be responsible for, the lower your insurance premium is likely to be The provision of a 24-hour helpline D is co u nt s o n p ay i n g a n a n n u a l premium rather than a monthly one Discounts for those over 50 Many, but not all, buildings insurance policies are combined with contents insurance
I OWN A FLAT/APARTMENT: DO I NEED TO ARRANGE BUILDINGS INSURANCE? If you own an apartment or flat that is part of a bigger building, you should ensure the owners of the freehold have adequate buildings insurance in place and that this covers your property. After all, damage to the infrastructure of the building may have an impact on your property or could even destroy it. If you are not satisfied, you can always take out extra cover. If, on the other hand, you rent a property, it is normally the responsibility of the owners of the freehold or their managing agents to arrange insurance cover. MY PROPERTY IS RENTED TO TENANTS: DO I NEED BUILDINGS INSURANCE? It is important to insure the premises irrespective of whether you personally are living there. If you do have tenants, you should consult with your insurance company to make sure your policy covers properties that are rented. MY PROPERTY IS CURRENTLY UNOCCUPIED: DO I NEED BUILDINGS INSURANCE? It is still important to insure a property that is lying empty. However, it can sometimes be slightly more difficult to obtain the cover. The premiums may be higher for the period that the building is empty. CAN I CHANGE MY POLICY AFTER I HAVE TAKEN IT OUT? You can elect to change your buildings insurance policy as often as you like, although you should make sure that your property remains properly insured during the change over period from one insurer to another. WHAT SHOULD I THINK ABOUT WHEN CHOOSING A POLICY? Compare the cover offered by various policies and see what is most suitable for your needs. Importantly, look for any restrictions within the HKGOLFER.COM
policy, for instance on flood cover or accidental damage. Also, check for discounts on higher excesses and annual premium payment. WHAT IS CONTENTS INSURANCE? Contents insurance covers the ‘material possessions’ in your home, for example, a stereo or iPod, clothes, curtains, carpets and furniture. In most policies, the cover extends to areas outside the main property, such as a greenhouse, conservatory or garage. However, more expensive items, usually of £1,000 plus — an expensive computer or jewellery, for example — may have to be insured separately as the majority of policies have limits on payouts. As a policyholder, you will normally be covered if your possessions are stolen, or damaged, for instance, by fire, flood, burst pipes, boilers or storms. However, most policies do NOT cover such things as general wear and tear and, unless they offer additional accident cover, spilled paint on a carpet. The important thing is to understand that every policy is different, to always read the small print for exclusions and to shop around for the best cover and price. If you are unsure about anything, always speak to an experienced and independent broker. HOW MUCH CONTENTS INSURANCE DO I NEED? The best way to work this out is to methodically walk around your home with a pen and paper — not forgetting attics and outhouses — and write down all the items in it. For specific items, such as antiques, it may also be worth taking a photo, which could prove useful in the event of a claim. Once you have done this, simply add it all up and you’ll have a pretty good idea of the cover you will need. WHAT’S A COMBINED BUILDING AND CONTENTS POLICY? Combines policies covers both buildings and contents, and insurers often sell them at a discount in order to make them more attractive. But it can still be cheaper to buy separate policies on the open market. I do hope you found the article of interest and should you have any queries please do not hesitate to contact me direct.
YOUR PROPERTY, OUR PRIORITY Let Complete RPI overview your UK property free of charge and answer the following questions: - Is your property under-let? We increased our rental income for client's by 7% last year, did your agent? - Have you contracted with the most up to date tenancy agreement? Changes in legislation occur daily. - We only charge monthly fees, are you paying up front? We charge a monthly Letting & Management Fee and no up-front fees, does your agent do the same? - We offer free rental guarantee insurance, does your agent? - Is your property inspected every three months by an independent inventory clerk? If not it should be and we pay the cost. Does your agent? - Do you have 24 hr access to your very own bespoke online property platform which allows you to view all aspects of your property including management statements, invoices, interim inspection reports, values, gearing ratios, etc ... at Complete RPI this is standard. The answers to these questions and many more could both save you money and increase the return on your capital invested. Please call us on +852-9307-0337 or write to info@completerpi.com Why not visit us at www.completerpi.com ... “Your Property, Our Priority."
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