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Do I need building insurance if my property is rented out?

Wednesday, April 06, 2022

Are you currently renting out a property, apartment or granny flat to someone? If you are, you're part of South Africa's rapidly growing group of landlords. The number of people renting a home has grown by over 30% over the past decade and demand is unlikely to slow any time soon. It should mean you can look forward to receiving a rental income from your property for the foreseeable future, however, if you don't have home building insurance, you might not be so lucky. This is why you should get building insurance for any property you rent out and how, if you live in South Africa, building insurance from Dialdirect can give you peace of mind.

Why you will always need property insurance

 

When you rent out a property, you do so understanding that they might age the structure due to wear and tear. You trust that your tenants will keep the property in a reasonable condition by regularly cleaning and maintaining it, however, should your tenants leave the property in a poor state when they vacate it, you can always retain their rental deposit to recover your cleaning costs. As a landlord, this scenario might incur the biggest costs associated with your property — besides your monthly bond and rates payments. In reality, you might find yourself having to pay out more money than anticipated should the unexpected take place.

The reality is that even if you're not physically occupying a rental property you own, it's yours by law and on paper. That means that should anything happen to the property — be it accidental or malicious — you'll be responsible for it. This is where home building insurance (also known as property insurance) comes in handy. In South Africa, building insurance covers you for any damage sustained to the physical structure of your rental premises or any other fixed structures on the property. This can include any garages, swimming pools, gates and fences on the property.

 

Building insurance can be a lifesaver for landlords as it can act as a form of landlord insurance. Say, for example, your rental property roof collapses in a storm, leaving your tenants temporarily homeless. Building insurance can cover the cost of your lost rental income and also the cost of repairing the property to its former state. In another example, tenants could flee your property (or you could evict them) after they damage it during a wild party. If it's in no state to rent out again, home building insurance can cover the costs of making it suitable for living in, so that you can put it back on the market as soon as possible.

Who pays the building insurance on a rented property?

 

If you live in South Africa, the homeowner is responsible for paying for building insurance. Many landlords are understandably cautious when it comes to getting a home building insurance quote or property insurance information. After all, it can feel like you're paying to cover the costs for a tenant's carelessness with your property, however, this isn't necessarily true. Your lease agreement will determine how well you're protected. Ideally, the agreement will clearly outline who's responsible for what. Arranging for a walk-through with a potential tenant before they sign the lease (and documenting the property’s state with photos) can ensure both parties are on the same page when it comes to maintenance of the property going forward.

Maintaining and repairing the building's structure, including the plumbing and wiring, is usually the landlord’s responsibility. However, this might not apply if any damage sustained was due to tenant negligence. Tenants are responsible for keeping the property as it was when they moved in. In other words, keeping the pool clean, lawn mowed, gutters leaf-free and light bulbs switched off.

Everything that a tenant brings into the property that they personally own is not covered by building or property insurance. It's up to the tenants to ensure they've purchased home contents insurance because even if structural damage accidentally harms their personal belongings, home building insurance won't cover it.

Is the landlord or tenant responsible for home insurance?

 

To better understand how building or property insurance and home insurance complement each other and who is responsible for what, the following scenarios might help.

Thando is renting out a flat to Maria and he requests and accepts a building insurance quote before Maria moves in. He suggests that Maria takes out home insurance, but she decides not to. One evening, Thando gets a frantic call from Maria. Her upstairs toilet has overflowed and leaked through the ceiling, causing extensive damage to her TV. Thando calls a plumber, who determines that Maria has been flushing kitchen paper towels down the toilet. In this scenario, Thando won't be liable for the damage to the property or for replacing Maria's damaged appliances. This is because Maria was negligent in causing the flooding and because she did not get home insurance. 

Let's say that instead of Maria, Thando rents out the flat to Ben after accepting a building insurance quote. When he suggests that Ben gets home insurance, Ben does so. One day, part of the roof collapses after a violent storm, damaging Ben’s bed and treadmill. Because the insurers determine that Ben didn't cause this accident and that Thando had been maintaining the roof prior to the accident, Thando's building  insurance covers the cost of repairing the property roof and wall. It also covers the income he loses while Ben stays with a friend until the damage is repaired. And because Ben has home insurance, his treadmill and bed are replaced as soon as he moves back into the flat.

When you were looking for an investment property to purchase you almost certainly took time and effort to select the best property for your needs — and you probably took similar care when selecting a tenant. So, it stands to reasons that it’s worth your time and money to do the same when learning about how you can protect this major investment: your rental property. If you’re still unsure about the differences between home contents insurance and building insurance, take a look at our guide on Everything you need to know about property insurance. 

Get a building insurance quote from Dialdirect 

 

If you’re a landlord and you’re ready to get building or property insurance, DialDirect can assist you with cover that gives you complete peace of mind and protection. For obligation-free assistance, request a building insurance quote from our team today.

Sources:

[1]Property24: SA rental numbers exploding and not all in the right direction