Why Landlord Insurance Is So Important
Imagine if your investment property was gutted by fire, vandalised by a disgruntled tenant, or even accidentally damaged by a great tenant.
It could be financially crippling to have to pay for repairs out of your own pocket. That’s why you need landlord insurance.
If you’re a landlord, it’s probably safe to say that your investment property is your most significant asset – or one of them. And that’s why landlord insurance is so important. It’s protection for your biggest asset, and that’s something no one should leave to chance.
What is landlord insurance?
Landlord insurance is designed to protect your investment property from loss and damage, and to protect you, the investor, from loss of rental income. It is all about minimising your financial risk. Depending on the particular policy and insurer, it can ensure your property against natural disasters and damage or theft by tenants. As with all types of insurance, exactly what is covered will vary from one policy to the next.
Some mortgage lenders require proof of landlord insurance when you take out an investor home loan, to ensure that they are protected against unexpected damage or loss to your property. The good news is that as an investment expense, the cost of your landlord insurance premiums may be tax-deductible.
Loss of rent
If, like many property investors, you rely on the rental income your investment property generates, how would you manage if it were to come to a sudden stop? Landlord insurance will typically cover you for loss of rent due to an ‘insured event’ which renders your property unliveable. Insured events differ from policy to policy, but might include fires, storms or floods. You may also be covered for loss of rent if your sole tenant passes away.
Rent default
Normally landlord insurance might cover tenant-related rent default, such as missed rent payments, legal costs associated with pursuing a tenant for rent or loss of rent due to the property being vacant. However, many insurers have not offered rent default cover since the COVID-19 rental eviction freeze was announced in March 2020. Check with your insurer before taking out a policy.
Damage caused by tenants
We’ve all heard the horror stories of nightmare tenants who trash rental properties. Thankfully they’re few and far between, but landlord insurance usually covers malicious or deliberate damage caused by tenants or their guests, including graffiti and vandalism.
Even if you have gold-standard tenants with the best of intentions, accidents happen. Check your policy to see if it covers things like accidental glass breakage, scorching of benchtops and water damage.
Some policies will also cover damage caused by a tenant’s pet.
Theft and burglary
Some landlord insurance policies cover the cost of damage and stolen items in the case of theft or burglary carried out by your tenants or their guests. The cost of replacing the locks might also be covered if they’ve been damaged, or there is reason to think the keys may have been duplicated.
Public liability
Landlord insurance may offer public liability protection, providing cover if a tenant or their guest is injured in your investment property. Policies that include public liability protection come into their own when a tenant suffers an injury and makes a negligence claim against the landlord.
Save time and money
Ultimately, landlord insurance may well save you time and money. If the worst happens and your property is damaged, having landlord insurance in place may make the repair process easier, cheaper and quicker. And the sooner your property is back in order, the sooner it can return to generating rental income for you.
We specialise in property management here in Brisbane. For more expert advice, contact our team today.
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