Most people who own valuable assets, whether it be a car, a rare comic book collection, or their own home, understand the value and importance of insurance. It’s a safety net, there to protect you if the unexpected happens.
If you own an investment property, the right insurance is especially important. Unfortunately, a lot of landlords don’t realise that your typical home and contents insurance policies don’t provide the cover you need.
You need specialised landlord insurance to provide comprehensive cover against a number of factors most property owners don’t need to worry about, such as intentional damage or loss of rental income.
53% of the claims made by landlord insurance policy holders in the 2014-15 financial year were for loss of rental income. If you are relying on the rent you receive from your tenant to help pay your mortgage on the property, and that money stops coming it can put you at significant financial risk.
We’ve heard stories of burglars breaking into a rental home, stealing what that can and trashing the property while they are at it. Sometimes the damage is so bad that your tenant can’t live there until it has been repaired. This can potentially cost you tens of thousands of dollars in repair costs and lost rent. If you have good protection, your insurer will pick up the repair bill and reimburse you for the lost rent.
There are also stories of terrible tenants refusing to pay rent and causing thousands of dollars of damage before they are eventually evicted. Landlord insurance can protect you, and your investment, in these circumstances too.
The majority of tenants take good care of rental properties, just as most tenants pay their rent on time. Hopefully, you will never have a bad tenant (and a good tenant screening process can help reduce the risk of you getting one), but if you do, it’s good to know you won’t be left stranded.
A good landlord insurance policy can save you from significant financial loss should an unfortunate event occur. Even if it’s just for your own peace of mind, it is a worthwhile investment. It can also be written off as a business expense, making any policy premiums you pay tax deductible.
It sounds like landlord insurance should be an obvious choice for anyone with an investment property, but some recent studies have shown that close to 50% of landlords don’t have adequate protection for their property. Hopefully you don’t fall into this category. We really can’t stress how important it is to make sure one of your most important assets is properly protected.
If you are looking for a landlord insurance, there are a number of things you should make sure are included in your policy. A good policy should cover you against:
Loss of rental income
This is possibly the most important type of coverage. It means you will be reimbursed if the tenant fails to pay rent or defaults on the lease. It will also cover you if you are unable to rent out your property due to damage.
It’s very important to ensure you are covered in case tenants or their guests cause any accidental, malicious or intentional damage to your property.
This protects you in the event that tenants or their guests injure themselves in your property and make a legal claim against you.
Make sure you are covered against the theft of items by both burglars and tenants, as well as any damage caused during the crime.
Acts of nature
This includes any damage caused by storms, lightning strikes, floods, fire and earthquakes.
In the ACT it’s crucial that your landlord insurance provides insurance for tenancies that are in a periodic term. Some policies only cover you while there is a fixed term tenancy in place. In the ACT, when a tenancy expires, the tenant is not required to sign another fixed term tenancy and may choose to remain on what is known as a month-to-month or periodic tenancy. Of course, they still have to pay the same amount of rent and abide by the same rules as before. Some policies only cover you while a signed tenancy is in effect, so if anything does go wrong during a periodic tenancy, it can cause difficulties.
If you have any questions about landlord insurance, or if you want advice on other ways to look after your investment property, contact our property management team.