Do I Need Landlord Insurance?

lady holding bucket under leaking ceiling

Do I need landlord insurance? It’s the inevitable question that’s asked by many new landlords, and if you’re looking for peace of mind, then the answer is simple; YES!

So what is Landlord Insurance?

Landlord Insurance is a specially designed policy that’s aimed at protecting you, the landlord, against some of the most common risks faced when renting out your property.

Whilst many landlords will have a current policy that covers their building against loss and damage in relation to fire, storm, flood and similar circumstances, it will not cover them against other more specific risks associated with tenants and rental properties. But Landlord Insurance should, depending on the policy you choose.

Loss of rental income

There are a number of reasons that a tenant may default on paying their rent, but the result is the same; you’re out of pocket and you still have a mortgage to pay. Most policies should cover you if tenants’ default or abscond, if they’re suffering financial hardship, if they fail to give vacant possession, or in the worst case scenario, if they die.

You should also ensure that your policy covers you in event of fires, floods and other such disasters, as these will also see you out of pocket; you can’t expect a tenant to pay a lease if the property is uninhabitable.

Damage to building or contents

These are 2 different things, so it’s imperative to ensure that both are covered.

The building relates to the physical structure plus things such as hot water systems, air-conditioning and heating, cabinets, cabling, sheds and garages, whereas the contents refer to such things as carpets, flooring, curtains, blinds and light fittings.

The damage might be caused by tenants or their invited guests. It may be accidental, deliberate or malicious, it might be caused by pets or it may be that there has been an incident where theft has been involved. Whilst you do have a bond that can be drawn against with permission to fix some issues, it is often not enough to cover the total cost of repairs or replacements.

Public liability

The majority of policies should have coverage for public liability. Whilst those who own a home that is covered by a body corporate will assume that they are already covered for this, they may want to check the finer details, as it is common that body corporate policies will only cover common areas, not individual properties. What does this mean for you, the owner? It means that if your tenant or one of their visitors incurs injury that results in medical expenses or loss of income, you could well be out of pocket. Why risk it?

Where do I get advice?

There are a number of ways that you can get information and advice relating to Landlord Insurance.

If you have friends who also own investment properties, ask them who they are covered by, and why. Also ask whether they have ever had to use their cover, as sometimes it’s when making a claim that you get a true understanding about the customer service a company will deliver.

Ask your property manager if they have any recommendations and if so, why they feel comfortable putting them forward. Have they had direct contact with that company, or are they basing the recommendations on word of mouth, and the experience of other clients?

The internet is also a great place to do your research. Here you can make your own comparison between companies, as well as reading independent testimonials from current and past landlords. For those who struggle to understand how inclusions vary between providers, there are services like iSelect who will decipher the information for you. It’s important to be aware that companies such as iSelect will have a range of providers that they compare across, but they do not cover the whole market.

Most major insurance companies now offer a version of landlord insurance, as do many smaller ones and brokers. If you’ve been happy with your current home, or car insurer, this may be a great place to start looking, as there is often the option of bundling policies to gain additional discounts. As with any decision, understanding your options is key, so conduct thorough research and make sure you understand the finer details of the proposed policy.

There are enough things to worry about in life; don’t let your investment property be the thing keeping you awake at night!

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