Property can be an excellent long-term investment, but it doesn’t come without risks.
There can be a chance your tenants may default on the rent, steal items from the property or cause damage that their bond may not cover.
The rental income you rely on to pay the mortgage could disappear if a natural disaster renders the premises uninhabitable for an extended period of time.
That’s where landlord insurance comes in.
A specialised form of cover designed to protect property owners who rent out commercial or residential spaces by mitigating some of the most common risks associated with being a landlord.
While having a landlord insurance policy is not mandatory, it’s highly recommended by real estate professionals and financial specialists who’ve seen landlords suffer significant losses and hardship from tenant-related events.
What’s typically covered in a landlord insurance policy?
A landlord policy typically comprises a combination of building, contents and landlord insurance.
Property damages from natural disasters (such as fire, flooding and storms) are likely to be covered, as are possessions kept on the rental premises for maintenance purposes, such as tools and gardening equipment.
The landlord component of the policy typically covers loss of rental income if the property becomes uninhabitable. This could happen as the result of a covered event, rent default, damage or theft by tenants and their guests, liability in the event of an accident, and legal expenses, if necessary.
What landlord insurance doesn’t cover are the regular costs associated with being a landlord.
This could include construction defects, normal wear and tear, and ordinary expenses, such as plumber’s bills for clearing drains.
PAYING FOR PEACE OF MIND
Landlord insurance has proven a worthwhile investment for Rodney Holder, whose property portfolio includes a block of units in the central Queensland town of Rockhampton as well as houses in Canberra and Brisbane.
His policy covered the cost of making good the damage caused by one less-than-careful tenant in his Canberra property, including torn curtains, a hot pot burn mark on a newly laid floor and a broken door on a new oven.
“As with any insurance, you’re paying for peace of mind,” Holder says. “It’s also tax deductible and a cost of doing business.”
Other claims can be significantly larger, warns Jo Napoli, the Principal of real estate agency The Rental Specialists.
She recently helped a client evict squatters from their investment property and says the bill for lost rent, new locks, damage to the premises and cleaning came to just under $10,000.
After being provided with a copy of the condition report, tenancy ledger, photographic evidence of the damage and invoices for repairs, the client’s insurer paid the claim within 14 days, Napoli says.
COVER WHEN IT COUNTS
If you’re a landlord or considering becoming one, it’s a good time to consider the benefits of landlord insurance. It could also be worth reviewing your level of cover to check it remains right for your circumstances.
Contact your AIB Insurance broker today to discuss your unique insurance needs today.
Important notice
All information in this article is of a general nature only. This article does not take into account your specific objectives, financial situation or needs. It is also not financial advice, nor complete, so please think about whether this type of insurance is appropriate for you. Deductibles, exclusions and limits apply. You should consider the Product Disclosure Statement or any Target Market Determination in deciding whether to buy or renew this type of insurance. Various insurers issue this type of insurance and cover can differ between insurers.
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