With the current economic climate and rising cost of living, it would be understandable to think that landlord insurance is an expense property investors could do without.
But when it comes to the crunch, having a comprehensive policy could save more than your bacon.
MARQ Property Management Director Jess Campbell said a good landlord insurance policy should be a non-negotiable for every property investor.
“MARQ strongly encourages landlords to take out a landlord insurance policy to safeguard themselves and their property in the event that a rental arrangement does not quite go to plan,” Jess said.
“Landlord insurance is a must in my opinion. The yearly cost is approximately $350 and is tax deductible.”
What is landlord insurance?
Landlord insurance is a specific insurance policy designed for investors to help protect them from the risks of renting their property out.
It’s a good idea to check the fine print of individual policies, but most landlord insurance will cover for tenant-related risks, including unpaid rent, property damage and accidents.
What does landlord insurance cover?
There are a range of options available when it comes to selecting the right landlord insurance policy for you and your property.
Cover options include policies with third party liability in the event that a tenant damages or destroys the structure; cover for the cost of rehousing a tenant if the home is inhabitable after a fire or flood; and contents insurance for furnishings and fixtures.
As well, landlord insurance covers for the loss of rent if a tenant defaults on payment and injury claims made by a tenant or visitor if an incident happens on your property.
Jess said MARQ’s preferred policy providers offered a range of different cover depending on the type of investment.
“If you own an apartment managed by a strata, you should only need landlord’s contents insurance as the building insurance would be covered within the levies and strata insurance,” she said.
“However, stand-alone houses require both building and contents insurance. It’s always imperative to carefully read the Product Disclosure Statement (PDS) before starting any new policy.”
Changing circumstances
As the cost of living climbs across Australia, the potential for a tenant’s circumstances to change is also increasing.
Even if you have done your due diligence and selected a great tenant who has never missed a rental payment, it can only take a change in circumstance for things to turn – and that could have a knock-on effect for you financially.
The loss of employment, the end of a relationship or the onset of a serious illness or injury might mean the tenant may be unable to meet their obligation to pay rent and may need to break the lease or vacate the property early with a rent debt.
Having a sound landlord insurance policy will help ensure you aren’t left out of pocket in the event that something unexpected happens. It may also help cover loss of rent, cleaning and repair costs as well as leasing and advertising fees if the tenant does move out unexpectedly.
Accidents and property damage
It would be wonderful if we all had a crystal ball to know what the future holds, but the reality is we don’t and accidents will happen.
Having a comprehensive landlord insurance policy will give you peace of mind that you can continue to cover the mortgage repayments even when unforeseen events and accidents occur.
This may include natural disasters and accidents such as burst or leaking water pipes and fires and floods.
Good insurance should also help you meet your expenses while the property is being repaired and may not be tenanted.
Pets
They’re cute and cuddly, but pets can cause damage.
While most tenancies will have a pet bond to help cover any pet-related damage to your property, landlord insurance may also extend to more serious damage.