Do I need landlords insurance?

As an investment property owner, protecting your investments is of the utmost importance. Having landlord insurance in place is one way to do this.

In case you’re unfamiliar with this type of insurance and why we recommend you take it out, here’s a brief overview of what’s involved.

WHAT IS LANDLORD INSURANCE AND WHY DO I NEED IT?

There are inherent risks to owning a rental property, and while landlord insurance isn’t compulsory for property owners, it is an important risk management strategy that can protect you from unforeseen circumstances.

Landlord insurance is separate to building insurance, which covers unexpected damage to a building from things like storm, flood and fire damage, vandalism and theft.

Landlord insurance generally covers:

  • Accidental, deliberate or malicious damage to the property caused by tenants (or their visitors)
  • Loss of rental income if:
    • Tenant absconds from the property with rent unpaid
    • Tenant is unable to pay rent due to financial hardship
    • Property becomes untenable due to damage from an insured event.

Depending on your level of cover, there are many other instances for which you can be insured, from pet damage to unusual circumstances such as illegal drug lab cleanup.

Public liability insurance (which might also be known as legal liability insurance) is also usually included as part of landlord insurance. This insures you in the case of any incident at your rental property leading to injury or death for which you can be held liable as the property owner.

It is worth noting that depending on the insurance agency, insurance claims might not be successful if there is no fixed-term lease in place (i.e. if tenants are on a periodic tenancy agreement).

WHERE SHOULD I PURCHASE LANDLORD INSURANCE?

We believe it’s wise to choose a provider who specialises in landlord insurance, rather than a general insurance company.

Take an example we’re aware of where a property owner held a policy with a generic insurance agency, which offered a landlord insurance option but did not specialise in that area. The owner’s tenants absconded suddenly, leaving damage to the property and rental arrears. The owner needed to claim for loss of rental income, property damages and rubbish removal.

However, the excess to be paid with the generic agency was several thousand dollars, and things like rubbish removal were not included in the policy – leaving the owner out of pocket at an already stressful time.

The excess on policies with specialist landlord insurance agencies, on the other hand, tends to be much lower (generally in the low hundreds), and the policies are usually inclusive of extras like rubbish removal. This makes it well worth going with a specialist for the peace of mind of knowing your property is as protected as possible.

We suggest contacting an established provider such as Terri ScheerEBM RentCover or CoverWise to discuss your landlord insurance needs.

Disclaimer: This information is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your situation, and for professional advice, seek out a financial adviser.
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