Insurers have an important role to play in providing protection for both investors and mortgage providers. Lenders require  property owners to adequately insure their property. Insurance is an important protection and investors should ensure a property is insured for its correct replacement value. Under-insuring will not provide a sufficient amount to rebuild a property should something happen.

Contents insurance is also needed as it covers any carpets, light fittings, curtains and other fixtures. It is dangerous for an investor with a mortgage to have no insurance. For example, if their property were to suffer major damage from fire and there was no insurance, the unlucky investor would have no property, no money to rebuild it and still have to pay the mortgage. Insurance companies also provide landlord insurance, which covers a variety of situations, including rent loss, malicious damage and legal fees.

Regulations contained within the Financial Services Reform Act require anyone giving information about insurance to be licensed to do so. Anyone providing information without being licensed faces a large fine. You are able to provide your clients with basic factual advice on what the cover includes and excludes, excess amounts and policy wording. You are not able to advise clients on the most suitable policy and should refer them to licensed insurance broker.

 

 

Activity

Paul and Molly have purchased their first investment property and are seeking advice on what insurance they need.

  • What is your advice as their investment advisor?