Landlord insurance exists for the following circumstances:
- Damages that are caused by your tenants, such as holes in your walls or ceilings.
- Damages that are caused by your tenant’s pets.
- Replacement costs of locks that are damaged beyond repair or where the tenant has made duplicates of keys.
- Damage that has been caused by natural disasters.
- Damage caused by water from leaks or burst pipes.
- Rental defaults when there are late rent payments or when a tenant simply doesn’t pay.
- Legal liability which covers incidents such as, damage caused to another person’s property by your tenant or if someone is injured or dies on your property.
- Clean-up costs that are incurred from major damage internally or externally, significant rubbish pile-ups or graffiti caused by your tenants.
- Theft committed by your tenants or guests of your tenants.
- Legal costs that are incurred due to eviction notices.
As a landlord, if you don’t have landlord insurance, you run the risk of being liable for repair, loss of rent and eviction costs should your tenants (or their guests) cause damage to your property that results in any of these scenarios.
While it’s important to minimise these risks by ensuring your property manager is heavily screening your tenants up front, accidents do happen! What’s more, if your tenant is injured or dies while staying on your property, you could be up for some serious dollars in liability claims.
The most reliable landlord insurance policies
All policies are different and range from very basic coverage to those that cover every possible peril, so it’s important to assess all the different types of landlord insurance to understand the different categories of coverage available to you.
To help you with your decision and shopping around for the best policy, here are the most three important things to consider:
Does more expensive mean more value?
In many cases, the cheaper the insurance policy the less you are covered for which means less value for your money in the long run. On the other side of the coin, the more you pay on your policy, the more likely you will be covered for more inclusions and of course your expenses will be larger which means you’ll be able to claim more on your tax return.
The cost of landlord insurance varies between states and territories, and many cases suburbs that come with a higher risk factor which can increase the price of your policy. Higher risk factors that can increase the price of your policy include crime statistics and the potential of natural disasters in the area.
Whilst there are factors that can bump up the price of your policy, landlord insurance isn’t overly expensive and the good news for property investors is that it helps to protect their asset and it can be claimed as an investment expense.
What are the inclusions and exclusions on your policy?
As some unlucky landlords have already discovered like those in NSW and Queensland that have been affected by the floods, or with the fires that strike Western Australian households, it pays to make sure you have the right inclusions in your policy.
If you’re investing in area that isn’t local to you, it pays to have insight on the ground by speaking with local property managers, real estate agents or insurers. Not only do you want inside market knowledge but also an understanding of unpredictable weather conditions or high crime activity to ensure you can protect your investment adequately.
Having this type of insight in advance can allow you to shop around more effectively and check each policy for the following types of inclusions:
- Damage caused by natural disasters (particularly important if your area is prone to certain natural disasters).
- Loss of rent (be sure to check for any restrictions such as weekly rent limits).
- Damage caused by your tenants, guests or their pets.
- Damage caused by faulty fixtures and fittings (burst water pipes).
- Theft or burglary and corresponding damages to your property (by your tenants or guests).
- Public liability cover for injury to anyone living in or visiting your property.
- Legal costs associated with tenant eviction.
Do you get any extras?
Often is the case with most policies, they are so similar that it becomes difficult to decide which one is the best for you. If you’re finding yourself in this situation, it can be helpful to consult with a third-party expert such as your local property manager. Their experience in the property investment market can help to aid your decision – often they can highlight some of the extra incentives that could be of benefit to you and help to identify the policy that’s best for your individual circumstances. For example, some landlord insurance policies will cover expenses associated with re-letting after a tenant eviction or the replacement of keys and locks.
Are you ready to get yourself covered and protected?
As highlighted, there really is no one size fits all when it comes to finding the right policy for your property. Finding the right one means looking at your circumstance, assessing your risk exposure and getting the right advice from the right people.
Some extra things to keep in mind that might be relevant for your situation:
If you have an investment that requires strata insurance (body corporate insurance) then the legislative requirements can vary from normal landlord insurance because you have to be covered for ‘common property’ under the management of the strata title or the body corporate entity.
Will you be renting out your property furnished? If so, the you’ll need to ensure your policy covers you for contents insurance and if there are any circumstances where your policy won’t cover your contents.
Do you allow your tenants to have pets? If so, you’ll need to make sure your policy covers you for any accidental damage caused by your tenant’s pets.
Like many people who bypass the insurance route, some landlords like to run the risk that nothing will happen to their rental property. But, as you can see even when you have reliable tenants, damages can still occur beyond their control which will leave you with financial headaches.
It is for that very reason that landlord insurance is one of those safety nets that could help to boost the financial success and mindset of your property investment journey.
Remember, that property investment is a long-term strategy, so it pays to reduce the risks of being a landlord by protecting your asset. If you’re looking for a property manager that can provide you with the right guidance and knowledge to help you risk manage your property, go here to contact our experienced team today!
The information outlined in this article is for general purposes only and we do not make any warranties about the completeness, reliability and accuracy of this information. Benchmark Specialist Property Managers strongly advise that you seek the guidance and support of a financial advisor or insurance company when making any decisions around the types of landlord insurance policy that is right for you. Any information that you take from this article and Benchmark Specialist Property Managers is strictly at your own risk and we will not be liable for any losses or damages in connection with the use of this information.