Property Managers Melb | What Is Landlord Insurance And Do I Need It? |
If you’re renting out an investment property it’s best to look out for any options that could potential protect you from the expenses of damages and repairs.
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What is landlord insurance and do I need it?

9 min read

 

What is landlord insurance and do I need it?Landlord insurance is an insurance policy designed to protect your investment property. There will always be risks associated with owning a property so this insurance will help safeguard it. Generally speaking, landlord insurance will cover events that can cause a loss of rental income, theft, or damage to your property. 

 

You’ll find that landlord insurance is available from most of the big insurance providers in Australia. So you will have the luxury of comparing and choosing between several different insurance products. While you’re comparing these options, you’ll often find there are three major areas covered by landlord insurance:

 

  • Loss of rental income
  • Damage to the property’s structure
  • Damage to what’s inside the property (e.g appliances, carpets)

 

Landlord insurance can be used for all sorts of investment properties. These property types include houses, units, apartments, villas, and townhouses.

 

 


What’s the difference between landlord insurance and home insurance?

 

Landlord insurance often gives you the same level of cover as a standard home insurance policy. One of the main differences between the two insurance options is the protection against damage or loss caused by tenancy issues.

 

What are the exact items I can get covered with landlord insurance?

Items covered by landlord insurance usually fall under building, contents, and tenancy categories. Below are the most common examples of items you can be covered for. 

Building cover

This covers damage to the structure of your investment property as a result of:

  • Explosions
  • Earthquake
  • Floods 
  • Falling trees
  • Fires
  • Lightning strikes
  • Storm damage
  • Vandalism
  • Vehicle collisions
  • Water damage

Tenancy cover

This covers any damage caused by the tenants of your property.

 

  • Liability
  • Loss of rent
  • Rent default
  • Legal expenses taking tenants to court
  • Damage or theft by tenants or the tenants’ invited guests

Contents cover

This covers damage to the contents of your property as a result of:

 

  • Fires
  • Floods
  • Vandalism
  • Explosions
  • Earthquake
  • Falling trees
  • Vehicle collisions
  • Water damage

What is landlord public liability insurance?

 

Public liability insurance is generally defined as “an insurance that covers a person or business for costs from legal action if they are found liable for death or injury, loss or damage of property resulting from negligence.” While there is a clear definition you may find that every insurer’s policy may be different

 

Generally speaking, this insurance type is meant to cover the landlord for death, injury, or damage that happens to the tenant on the property. These items are included because they could fall under the responsibility of the landlord. 

 

Landlord insurance policies tend to include a version of public liability insurance in the terms and conditions already. So sometimes there’s no need to chase this up separately. In some cases, you may find that liability cover can insure your legal liability for up to $20 million. This cover includes:

 

  • Damages that are awarded to the tenant
  • The legal costs charged to the landlord for defending the claim
  • The tenant’s legal costs if the landlord ends up being at fault

 

 


Can landlord insurance cover my AirBnb?

 

If you own a rental property in popular holiday destination then there’s a good chance you’re already using it as an AirBnb. If you are worried about covering your property for this scenario there are short-term landlord insurance options available. These policies are perfect for people who choose to rent out their property for a short period of time. 

 

These policies cover situations unique to short-term rentals. One example of these situations includes the guest’s failure to leave the property when the stay is complete. You’ll also find that rental listing sites like Airbnb and Stayz offer their own versions of protection. For example, Airbnb offers ‘host protection insurance’ and ‘host guarantee’ policies which provide up to $1 million US worth of liability cover and protection against damages caused to the property. 

 

But be wary that the policies from these rental sites are not a clear substitute for landlord insurance. The insurance council of Australia (ICA) has warned people who rent properties on a short-term basis that they might not be covered if they don’t have landlord insurance.

 

 


How is the cost of landlord insurance calculated?

 

After looking at a few policies you will notice that there is not one set premium for these. The cost of the policy is often determined by the following factors. 

 

  • The value of your property and the contents
  • The type of property you are renting out
  • The current structural integrity of the house
  • Your current claims history
  • The location of your rental property
  • The level of security you have for the property
  • The state you live in
  • Additional policy inclusions that you choose

 

With so many different factors you can see how hard it is to come up with an exact amount for how much a policy will cost. On average, policies in Australia can range between $1,000 to $2,000. To get an estimate for your insurance policy, you’ll find that most insurers offer an online calculator. These are usually located on the insurer’s website. 

 

Is Landlord Insurance Important?

 

As a landlord, you have enough to worry about. Any number of things could go wrong with your investment property. Unexpected storms and structural damage, faulty appliances or disgruntled tenants are just some of the things that can cause investment property owners to stress and fuss about. While having a good property manager certainly helps to manage these scenarios, it’s also things like landlord insurance that can really help support your investment property.

 

Landlord insurance can provide a great level of risk protection for you and your property manager. When your investment property is fully insured it can save you valuable time and money. This type of insurance coverage can also protect you against any public liability. It’s legal considerations like these that are commonly overlooked by investment property owners. So are you still asking yourself is landlord insurance important? Read on to find out why many property managers still recommend it today.

 


Best practice in the industry today

 

In the real estate industry, it should be best practice for your property manager to discuss the financial risks of investment property management with you. With the right insurance policy in place, you can effectively manage these financial risks. An experienced and professional property manager should be able to advise you on the best options available today for a comprehensive landlord insurance policy. 

 

A landlord insurance policy can help minimise a lot of the risks that come with an investment property. Issues such as loss of rent, legal expenses, and damage caused to your rental property can all be covered by a good landlord insurance policy. As a landlord, be wary of the fact that your property manager will still need to keep a paper trail that shows that landlord insurance was recommended regardless of whether you opted for it or not.

 

Deciding not to have landlord insurance can backfire for you in legal proceedings because it shows you purposely chose not to have cover for your rental property.

 


What does it cover?

 

Landlord insurance can protect your investment property from an unfortunate loss or damage that’s usually caused by a loss of rental income or events covered by insurance. These events could include events like a fire, storm or flooding. It really comes down to the insurer you go with and the specific events covered in the fine print. 

A perfect example of loss of income could be your tenant deciding to avoid paying rent for months on end before revealing that they’re vacating the property with no intention of paying the rent. Damage of theft by your tenant could also be covered in the insurance policy.

 


What to consider when choosing landlord insurance

 

It’s very important to shop around for landlord insurance that really suits your needs. No policy is the same so you owe it to yourself to find one that matches your specific needs. During this policy search, your property manager may be able to recommend a few insurance policies to help you narrow down your search. 

 

Pricing

The pricing of landlord insurance usually weighs heavily on a lot of people’s minds when they choose a policy. The more you pay for insurance cover, the less of a profit you’ll make from your rental property. Ultimately you need to think about what’s covered and if the extra money is worth it. Another thing to consider is that landlord insurance is tax-deductible. So in a lot of ways you can save on the costs of landlord insurance simply by doing your tax return correctly. 

 

Inclusions and exclusions

It really pays to have the right inclusions on your landlord insurance. Imagine being covered for all sorts of weather damage only to have your property damaged by the one thing you forgot to include like hailstorms. The same can be said for theft and public liability cover which would include the event of someone being injured in your investment property. 

 

So while you’re comparing landlord insurance policies, check if the following items are included:

        • Loss of rent
        • Damage caused by tenants or their pets
        • Legal costs associated with evicting your tenants
        • Theft or burglary caused by your tenants or their house guests
        • Damaged caused by natural disasters common to the local area
        • Public liability cover any injuries sustained by your tenants at the house


Additions and incentives

Insurance companies will try all sorts of tactics to make their product stand out among others in the industry. This is where unique extras and incentives come into the picture. Each insurance provider has its own set of extras to look out for. So while you’re comparing insurance policies that look similar it may come down to the extras offered. 

Some policies may offer to cover your re-letting expenses after a tenant eviction. Some providers may offer to cover the cost of replacement keys and locks which can add up to over $500. Some may even provide you with tax audit insurance. These extras might make a small difference but they still provide value. So consider which additions and incentives best match your need today and in the foreseeable future.

 

 


3 key questions you should ask yourself when choosing an insurance policy

 

  • Does the policy cover furnishings?

If you’re offering a rental property with furnishings it’s important to figure out if your landlord insurance will cover them. You may have sentimental or antique furniture of great value in your rental property. The risk of damage is definitely there when it comes to your tenants living in a property with your furnishings. 

 

So before your next tenant moves in, think about all the furnishings inside the property. If you’re genuinely concerned about them being damaged then now is a good time to get them out of there or have them covered by insurance. 

 

  • Do I need specialist insurance?

Different types of property require different types of insurance. It’s not always a one size fits all scenario with landlord insurance. Say for example your rental property is part of a strata title. You would most likely need body corporate insurance. This type of insurance is currently mandatory in every Australian state. 

 

So don’t always assume that everything is covered with just landlord insurance. You may require something more specific for your property such as the previous example with body corporate insurance. In some cases, your average landlord insurance may not cover things like damage to common property under the management of a strata title or body corporate entity.

 

  • Will your tenants be bringing pets?

Under recent rental laws in Victoria, you are no longer allowed to refuse pets without a valid reason. As you’re probably aware, it’s not always easy to control what a pet does. Pet owners can’t be around all the time to make sure their pets won’t cause some sort of damage to your rental property. 

 

One of the best ways to prepare your rental property for pet ownership is to make sure your landlord insurance policy covers accidental damage caused by pets. It will put your mind at ease knowing any costly damage will be covered. This saves a lot of time and stress having to negotiate with your tenants to cover the costs of pet damage. 

 


Ask your local property manager for advice

 

If you’re not sure which landlord insurance is right for your property, there’s one expert you can turn to for advice. It’s your local property manager. Property managers are some of the most qualified experts you can turn to for picking the right insurance policy. With years of experience, they’ve probably seen all sorts of issues pop up between landlords and tenants. 

So when a property manager takes on your property, ask them for advice on landlord insurance. They are one of the most qualified real estate experts that can assess your property and help you make an informed decision on landlord insurance. Here at Property Managers Melb we can suggest some great insurance options tailored to your specific needs. Talk to one of our Property Managers today on 9221 6133. They can provide you with some helpful advice on insurance policies and other challenges related to owning your own investment property.


What we suggest

 

So if you rent an investment property, it’s likely that landlord insurance is worth the investment. It gives you protection for a wide range of events that can damage your property. These events include natural disasters, stormy weather, theft, and tenants abandoning their agreement. 

 

There are also ways you could potentially minimise the risk of taking out a claim. Consider our following suggestions:

 

  • Pick a house in a good suburb that’s less prone to crime
  • Pick trustworthy tenants that fit the mould of who you want to be in your property
  • Pick a suburb that doesn’t have a long history of natural disaster events like bushfires and floods

 

Just make sure you carry out thorough research on any insurance cover you decide on. Review all documentation before you sign on the dotted line and don’t be afraid to ask around. Look for reviews and try and get advice from someone else who’s taken out the same policy. The more information you have, the more confident you will be about your choice of insurance policy.

 

For more great resources on property management, visit propertymanagersmelb.com.au.

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