If you are looking for insurance cover for property you own, it is important to make sure you are buying insurance specifically suited to the type of property for which you want the cover.
That importance is underpinned by a fundamental principle of insurance contracts that each party discloses what are called material facts.
This is very widely defined as anything likely to influence an insurer when deciding whether or not to accept your application for cover, explains the British Insurance Brokers’ Association (BIBA).
That means that when you apply for property insurance, you must declare what type of property it is, the purpose for which it is to be used, and whether it is occupied by you or tenants.
Failure to declare any such material fact – by representing a buy to let property as the home in which you live, for example – may invalidate your insurance.
Types of property
Following this principle, a number of distinct types of property insurance are available:
Standard home insurance
- called standard because it is the type of property insurance typically bought by a homeowner-occupier for the protection of their principal place of residence;
- this recognises that the property is effectively a business asset, reliant upon rental income from the tenants who live there;
Holiday home insurance
- if you are fortunate enough to own a second or holiday home, the insurance you need is a combination of both standard home insurance and landlord insurance – sometimes you might choose to live there yourself, whilst at other times you might let it to short-term tenants who are on holiday;
- that is when you may need purpose-designed holiday home insurance;
Commercial property insurance
- there are two principal kinds of commercial property insurance – depending whether you are using the premises for your own business operations or leasing them to tenants. Either way, the type of cover you need is commercial property insurance either as an owner or a landlord.
Elements of insurance
Within each of these types of property insurance, there are a variety of different elements of insurance cover which may be applicable, depending on the building’s use:
- Building insurance – protects the structure and fabric of the building against such major threats as flooding, fire, impacts, storm damage, vandalism and theft;
- Contents insurance – protects the contents you own against the risk of loss or damage, whilst any tenants or leaseholders are typically responsible for arranging insurance for their own possessions;
- Property owners’ liability insurance – as the property owner or landlord, you have a general duty of care to take every reasonable precaution against a third party – visitors to your house, tenants, their visitors, passers-by and members of the general public – sustaining an injury or having their own property damaged through some contact with your own;
- Compensation for loss of rental income – if you the landlord of residential or commercial property, your reliance on rental income is typically recognised by insurers who offer a degree of compensation for loss of rental income if the premises are temporarily unusable or uninhabitable following a major insured event.
Therefore, there are many different types of property insurance, each offering somewhat different levels of cover depending on the use to which the building is put – be sure to arrange the appropriate type of insurance for the property you own.