18 November 2016
Landlord Insurance, what to look for.
A recent survey carried out by Insurance Australia found that 35% of property Investors did not have specific landlord insurance on their tenanted properties.
For an outlay of a few hundred dollars a year, you can be covered for not only damage to buildings and contents, but also for rental default and damage by tenants. And it’s tax deductible. There are many benefits exclusive to landlord protection policies that are not available with normal home insurance policies.
A major benefit is where your tenant 'disappears' or falls behind in their rent, and then breaks lease. If you have the right insurance policy you will be covered for any loss incurred.
The other big benefit is where your tenant or their friends damage the property. A good landlord protection policy will also cover your investment property for malicious or deliberate damage.
In terms of coverage, make sure you’re covered for acts of nature. As has been highlighted by the recent spate of natural disasters that have afflicted Australia & New Zealand, these can strike at any time and can wreak wholesale devastation. Key events to check coverage examine closely
- Storm (including damage from lightning strike)
- Flood – look closely at the ‘type of flood’ covered. Some policies may not cover flooding from rivers bursting their banks, for example
- Tsunami and ‘ocean movements’
- Civil unrest and rioting
If you’re in an area that could be prone to any of these – even if it’s a relatively remote risk – then not taking adequate cover is a big risk.
You should also be clear on where you stand on contents, even if you’re not providing a furnished property. Contents insurance covers items that are not viewed as part of the structure of the property, such as:
- Household goods
- Internal blinds
- Loose floor coverings
- Light fittings which are not permanently fixed to the buildings
- Domestic appliances
As a rule, it will only covers items owned by the landlord, and not property owned by the tenant.
Rent default is probably the most important aspect of landlord’s insurance, and protects you against loss of rent. Not all policies cover all eventualities, but most should protect you against loss of rent due to:
- Tenant eviction due to a court order
- Tenants obtaining a hardship order
- Unexpected death of tenant
Legal liability cover is typically included in landlord insurance, to protect against the possibility of injury or death of the tenant or their visitors. A general contents insurance policy doesn’t not cover the liability in a Landlord – Tenant relationship.
It is not all good news so here are some points to consider if you are about to take out landlord protection policy:
- Make sure that your tenant is not in arrears at the time you take out the policy, as with some policies this will impact on your ability to claim for lost rent.
- Illegal activities are not usually insured. As an example, if your tenant was growing marijuana and damaged the property, the insurance company could well have an 'out' because the activity is illegal.
There are some really excellent policies available, but as usual, the devil will be in the detail.
I would suggest that you speak to an experienced insurance broker who has a number of insurance companies in his or her portfolio. That will ensure that you get the best advice and a policy that will suit you.
It requires some research to find the right policy, but as an investor, I suggest that you don't leave home with out one.
Raine & Horne South Australia
0438 000 242