Building insurance
Building insurance covers damage to the structure of the building: walls, floors, roof, pipework and fixed installations. For apartments in a complex, this insurance is typically arranged by the Owners Association and paid through the service charges.
For villas and townhouses in a community, the situation is similar, although some communities do not arrange building insurance collectively. In that case, you must take out a policy yourself as the owner.
Building insurance costs approximately 0.1–0.2% of the rebuild value per year. For an apartment with a rebuild value of AED 1,000,000, that is AED 1,000–2,000 per year. Always check with your Owners Association whether building insurance is included in the service charges.
Contents insurance
Contents insurance covers damage to or theft of contents: furniture, appliances, electronics and personal belongings. For furnished lettings, this is a policy the owner takes out for their furniture and appliances.
The cost is AED 500–1,500 per year for a furnished apartment, depending on the value of the contents and the cover. Risks covered as standard are fire, water damage, burglary and storm. Earthquake damage and war are typically excluded.
For unfurnished lettings, contents insurance is less relevant for the owner. The tenant can take out a policy for their own belongings, but is not obliged to do so.
Landlord liability insurance
Landlord liability insurance covers claims from tenants or third parties for injury or damage caused by defects in the property. Consider a leak that damages the tenant's belongings, or a loose balcony railing that causes injury.
This insurance is not legally required in Dubai but is strongly recommended. The cost is low: AED 300–800 per year for a standard policy with cover of up to AED 1,000,000.
Without liability insurance, you as the owner are personally liable for all damage and injury arising from defects in your property. A single claim can cost tens of thousands of dirhams.
Tenant insurance: what can the tenant take out?
Tenants in Dubai can take out a tenants insurance policy covering their own belongings, plus liability for damage to the rented property. The cost is AED 300–700 per year.
As a landlord, you can stipulate in the tenancy contract that the tenant must take out insurance. This is not a legal requirement but provides additional protection. We recommend it particularly for furnished lettings and for properties with high-end finishes.
Insurers in Dubai specialising in property insurance include RSA, AXA Gulf, Oman Insurance, Zurich and Orient Insurance. Augusta Properties can refer you to suitable insurers.
Our advice: the optimal insurance structure
For the typical international owner letting property in Dubai, we recommend the following:
Apartment (unfurnished): confirm that building insurance is included in the service charges, and take out landlord liability insurance (AED 300–800 per year). Total additional cost: AED 300–800 per year.
Apartment (furnished): the above plus contents insurance for your furniture (AED 500–1,500 per year). Total additional cost: AED 800–2,300 per year.
Villa: confirm the building insurance (or arrange it yourself for AED 1,000–2,000 per year), landlord liability insurance and, where relevant, contents insurance. Total additional cost: AED 1,300–3,800 per year.
These costs are modest relative to the risks they cover and should be factored into your yield calculation.