Investment properties present opportunity but they also need protection.
Landlord’s insurance is one of the most important purchases a property investor can make. For a reasonably small outlay, you can be covered for not only damage to buildings and contents but also for rental default and damage by tenants.
It pays to make sure you have the right coverage for your property so you are not left with a huge repair bill should you not have adequate insurance.
This 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
Depending on the insurance company you have your policy with, many of these policies will only kick in after four (4) weeks of loss – so make sure you get a full four weeks’ rent as bond. Claim limits also vary from insurer to insurer so you need to make sure you are going to be receiving adequate cover yourself should you ever need to put in a claim.
Check what your building cover will actually pay for. A building policy should protect the structure of your property, including:
- Pipes and cabling
- Fixed appliances
- Gas or plumbing systems
- Fixtures and fittings (except for carpets, loose floor coverings, curtains and internal blinds)
- Exterior blinds and awnings
- Some external structures
Building insurance should also cover you for the complete or partial destruction of the property, and typically covers loss of rent while the property is uninhabitable. You should also be covered for damage caused by the tenant and/or guests under a landlord’s building policy, although some providers may charge a premium for this.
It’s a little more complicated when it comes to units. As the fabric of the building is typically insured by a body corporate, you are forced to rely on their insurance for damaged to structure. However, you can purchase specialist insurance, usually called ‘strata title protection’ or similar, which will cover you in the event the body corporate is underinsured.
You should also be clear on where you stand on contents, even if you’re not providing a furnished property. Contents insurance cover 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 building
- Domestic appliances and utensils
As a rule, it will only cover an item owned by the landlord and not property owned by the tenant. You will typically be covered for damage to your property caused by the tenant and/or guests. Contents insurance for units is usually extended to cover fixtures and fittings usually covered by building insurance, as building insurance does not usually apply to units.
In terms of coverage you want to make sure you are covered for acts of nature. As has been highlighted by the spate of recent Natural Disasters we are all too aware that they can strike any time and wreak devastation. Key events to check coverage examine closely are:
- Storms (including damage from a 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 are in an area that could be prone to any of these events – even if it’s a relatively remote risk – then not taking out cover is a big risk.