As an investment property owner, protecting your investment is of the utmost importance. Having landlord insurance with the appropriate coverage is one way to do this. But what is landlord insurance and does it cover building insurance?
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What is Landlord Insurance?
Landlord insurance is designed to protect investment properties against an insured event that may cause loss of rent, malicious damage, or theft. The insurance premium in this case depends on the service provider and the rental agreement.
The primary benefit of a landlord insurance policy is to prevent financial loss related to owning an investment property. Depending on your coverage, you can also get optional cover for extreme weather events or freak accidents, like storms and floods. Additionally, landlord insurance covers loss of rent when the tenant defaults.
If you own a holiday rental, you can opt for building insurance to cover extreme hazards like water damage, fire, explosion, vandalism, or damage caused by tenants.
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Do I need landlord insurance for my investment property?
Though the inherent risks of owning an investment property are many, landlord insurance gives you optional cover to claim unpaid rent, cost to rebuild when there’s property damage, and landlord contents cover.
Here’s why you should consider landlord insurance cover.
Reduce Immediate Financial Stress
An investment property that ensures a profit yield is an asset worth protecting.
Whether you’re earning a weekly rental amount or a building sum, you must be prepared for unexpected expenses. From rent default to accidental damage, property owners have to be insured against all kinds of potential damages.
For instance, when a tenant stops paying rent, it is considered a huge investment property loss that may cause a stressful financial situation. Landlord insurance is a great risk management strategy that protects you against insured events.
With landlord buildings insurance, you can also claim the sum insured for property damage in case of any malicious acts. As a result, with adequate building cover, you can manage repairs and renovation necessary without facing any financial loss.
Manage Loss of Rent or Tenant Default
Besides covering accidental damage caused to the property under malicious intent, landlord contents insurance also covers 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 insured events
Ensure Landlord Content Coverage
Depending on your level of cover, there are many other instances for which you can be insured. For instance, contents insurance can help you cover repair or replacements costs for your interiors or home equipment. From replacing furnishings to repairing free-standing items like washing machine, dryer, fridge, and more.
Is Landlords Insurance Necessary for a Mortgaged Property?
Landlord insurance is not compulsory in NSW, however, as per landlord insurance policies, you can protect your mortgaged property against lost rent, malicious acts, and other accidental damage that can make the property uninhabitable.
What is Public Legal Liability cover?
Public liability insurance (also known as legal liability insurance) is 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. As a result, public legal liability coverage may not work for tenants on a periodic tenancy agreement.
What affects the minimum premiums for Landlord Insurance policies?
Factors that affect the premium for landlord insurance are:
- Size of the property and number of rental units
- Geographical location and possible risks in the area
- Type of security systems installed at the property
- Type and coverage amount for the rental property
Key Takeaways
- Landlord insurance protects against loss of rent, damage, or theft in investment properties.
- It's designed to mitigate financial risks, covering events leading to rent loss or property damage.
- Optional coverage includes extreme weather and accidental damage.
- Not compulsory in NSW, but vital for financial protection against tenant default and property damage.
- Factors influencing premiums include property size, location, and security features.
- Choosing a provider specializing in landlord insurance offers competitive rates and comprehensive coverage.
Why Choose a Reliable Landlord Insurance Company
It’s wise to choose a provider who specialises in landlord insurance, rather than a general insurance company.
For instance, a property owner with a home insurance policy would not be safeguarded against a case of abscondence. If the tenants vacate suddenly, leaving behind damaged goods and rental arrears, without landlord insurance, you cannot ask for compensation.
As a result, the property owner cannot claim for loss of rental income, property damages, and end of lease cleaning. All this because the landlord insurance option was absent from your home insurance policy – leaving the owner out of pocket at an already stressful time.
With a qualified landlord insurance partner, the cost can be more competitive and the policies are usually inclusive of extra amenities. This makes it well worth going with a specialist for the peace of mind of knowing your property is as protected as possible.
Our Property Investment Services team can advise or put you in touch with a trusted insurance broker, get in contact with them today.
