A common question asked amongst property investors is ‘Am I financially prepared to cover the costs if there’s accidental damage to my property?’
The likely answer is ‘no’ as repair costs and the possible loss of rent, could quickly turn your investment into a source of financial stress and be detrimental to your cash flow.
Landlord insurance can cover you against unforeseen repair bills and even the cost of replacing the property building(s) altogether.
What does landlord insurance cover?
Like general home and contents insurance, you can get landlord insurance for:
- Buildings on the property, for protection against natural disasters, fire or explosion, or damage resulting from impact. For instance, if a tree falls on your building, coverage usually includes built-in air conditioners, light fittings, or garden sheds;
- Contents, which safeguards any furniture, carpets, floorboards, or electrical equipment you’ve supplied for your tenants, and can include things like blinds, outdoor plants and lawnmowers;
- or combined cover for both buildings and contents.
Protection from problem tenants
Landlord insurance can also cover specific risks that owner-occupiers don’t have to worry about, such as damage caused by a tenant.
You’ve probably heard horror stories such as tenants who punch holes in walls or have parties where guests vandalise the property, or those who steal furniture or leave quietly with months of rent owing. As well as the financial costs involved, it can be heartbreaking to see your hard-earned investment so thoughtlessly damaged.
If you’re faced with a problem tenant, landlord insurance could save you thousands of dollars in repairs. Landlord cover can also help cover the costs of taking legal action against difficult tenants.
What’s more, some landlord insurance policies will cover you for loss of rent while you repair the property so new tenants can move in.
Even good tenants can cause accidents
Thankfully, most tenants want to do the right thing. But of course, accidents do happen. For example, a harmless game of backyard cricket can end with a ball smashing through the kitchen window, a glass of red wine accidentally spilling causing damage to your carpet or furniture, a leaking washing machine could flood the ceiling of the apartment below resulting in huge repair and replacement bills.
That’s why it’s worth getting landlord insurance that includes accidental damage and liability cover. Check your policy’s product disclosure statement (PDS) to ensure it covers things such as accidental glass breakage and water damage.
What isn’t covered
It’s important to know, landlord insurance won’t generally cover expenses that are part and parcel of having an investment property. This could include general wear and tear, repairs and maintenance, or loss of rent if your property is sitting empty while you search for a tenant. Some policies also won’t cover any repairs your tenants make, or damage caused by their pets.
Your tenants should also take out contents cover to protect their own belongings such as furniture, computers, appliances and other valuables.
Keeping the cost of your insurance down
Landlord insurance is an investment in peace of mind, which could save you hundreds of thousands of dollars if your property is seriously damaged or destroyed.
If you’re on a tight budget it’s worth finding ways to lower the cost of your insurance, rather than opting not to take out landlord protection at all.
For starters, you might be able to reduce your premiums by choosing a higher excess. Also, you could be eligible for a discount if you combine buildings and contents cover on one policy, or when you have additional policies with the same insurer. And if you’re over 50, ask your insurer if seniors insurance discounts are available (sometimes referred to as an ‘over-50s’ discount).
Questions to consider before you buy
Landlord insurance policies differ depending on the insurer. So before you take out landlord cover consider your needs carefully, read the PDS and choose a policy that’s right for you. Ask yourself:
- Do I need insurance for both buildings and contents?
- Does the policy cover accidental damage, as well as malicious damage?
- Does the policy include new-for-old contents replacement (e.g. if an older appliance is damaged and I need to replace it, will my insurance cover the cost of a brand new one).
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