The benefits of owning an investment property can be quickly surpassed by the significant costs of unforeseen damages to it.
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In addition to things that are out of your control like natural disasters or break-ins, landlords can't always control the tenants inhabiting their properties.
Landlord insurance can give you that peace of mind that whatever happens, your property is protected.
In this article, this article covers tips for protecting your rental property with landlord insurance to help you understand its importance and ensure you're adequately covered.
1. Know the difference between home and landlord insurance
Home insurance is insurance for damage that occurs to owner-occupied homes, while landlord insurance is a specialised insurance policy designed to protect property owners who rent out their properties.
Landlord insurance covers risks associated with renting out your property, which standard home insurance wouldn't (and wouldn't need to).
These are tenant-lead risks including:
- Tenant-caused damage to your property which is accidental or malicious
- Theft of property by tenants
- Legal expenses for tenant disputes or evictions
- Loss of rental income due to tenant default or damage
Typically, landlord insurance covers more than what the tenant's security bond might cover, offering more comprehensive protection for your rental property.
2. Understand what is covered
Most landlord insurance covers:
- Building and contents coverage: this covers damage to the building structure and fixed contents from things like storms, floods and fire. Fixed content refers to things such as walls, floors, roofs, carpets, curtains and blinds.
- Liability protection: this covers your legal fees and compensation if someone gets injured on your property and you're found to be at fault.
- Rental income protection: covers loss of rental income in various scenarios (for example, if your rental property becomes uninhabitable due to damage or repairs, if tenants default on their payments or if tenants break their lease early.)
- Tenant-related risks: covers you for any damage - accidental or malicious - caused by your tenants or their guests, theft of property contents by tenants, legal expenses for tenant-related court proceedings and more.
Like other types of insurance, an easy way to compare policies is by reading the Product Disclosure Statements (PDS) and picking one that suits your rental property the most.
3. Know when to get insurance
You might think that you only need landlord insurance when your property is occupied by tenants. Many policies offer cover if your property is unoccupied for up to 60 days.
But, there may be times when your property isn't inhabitable for longer. For example, it might need to undergo major repairs or renovations, or it might simply be a hard time to get tenants in.
Because you might still be liable if someone gets injured on your property when it's unoccupied, it's best practice to insure it even then.
You may have prospective tenants inspect it and have an accident and then be thousands of dollars out of pocket in claims.
4. Watch out for exclusions and optional add-ons
As with many other types of insurance policies, it's always a good idea to double-check what's included and a lot of the time, more importantly, what's not.
As owning pets becomes the norm in rental properties, you might want to check that your landlord insurance policy covers you for any damage to your property from pets.
This can include anything from lingering smells, carpet stains, and scratched walls.
Similarly, you might also want to check if your policy covers you for reimbursement if you need to get the locks changed due to tenant theft or otherwise.
This can end up costing you a few hundred dollars out of pocket if not!
5. Understand that where you are impacts the premiums you pay
The premiums you pay are influenced by various factors - including where you live - so do your research.
If you're living in an area where there are higher rental default rates, your premiums will be higher. Make sure you choose an insurance policy that fits your particular circumstances and location.
6. Review and update regularly
Like home insurance, you should review and update your insurance policies regularly to make sure they align with the current state of your rental property.
Consider changes like renovations, but also local conditions or changes in the property value.
7. Look for discounts
Beyond making sure your rental property is properly covered by insurance, look for ways to get comprehensive landlord insurance efficiently.
Some insurers offer discounts when you install security systems, alarms, loyalty or bundling with other insurance types of insurance.
