Landlord insurance is vital, as it can protect your investment property and rental income.
But what does it actually cover? We break down the different types of property insurance, what each type covers and how to work out which cover is right for you.
Landlord insurance is a particular type of home insurance that covers you against the usual home insurance categories as well as problems unique to landlords.
Typically, your usual home insurance is broken down into two parts: building insurance (protection for your home, or the building itself) and contents insurance (protection for your belongings, or the contents within the property).
Landlord insurance is slightly different, often known as tenants insurance, or tenants protection, it protects you against issues caused by your tenants. As a landlord, you can choose to take out a policy that covers all three parts – building, contents and tenants insurance – or a combination of the three that suits your situation.
As with any type of insurance, every landlord insurance policy is different and exactly what is covered will vary from policy to policy and between different insurance companies. However, the tenant protection portion of landlord insurance commonly covers you against such things as:
- Theft and intentional damage by your tenant
- Loss of rent when your property is damaged
- Loss of rent if the tenant defaults on payments
- Legal expenses associated with tenant disputes
- Replacement locks if you have to evict your tenant by Court order
A note of warning – the coronavirus pandemic has caused a change to landlord insurance, with some policies temporarily removing benefits such as rent default cover. Make sure to check this with the insurer before you take out a policy.
If your investment property is a free-standing house, you’ll want building insurance (sometimes referred to as landlord insurance when it relates to an investment property). Building insurance protects against property damage, loss or destruction following events such as fire, theft and natural disasters. It covers the building structure, including pipes, gas and plumbing, most fixtures and fittings such as blinds, awnings, fixed appliances such as dishwashers and so on. Be sure to read the exclusions in the policy documents to make sure you’re covered for all eventualities, such as damage caused by your tenant or floods and natural disasters prone to the area.
Strata insurance is taken out by a strata scheme’s body corporate to cover the building, common property and common areas. It is mandatory for strata schemes in WA to hold insurance which conforms to state legislation. As an apartment or unit owner, strata insurance can cover you in the event of damage to the building, but there is a chance it won’t be enough. Go over your strata scheme’s insurance policy with a fine-toothed comb to see what it covers, as some may only cover common areas. You might want to consider additional insurance to make sure your investment property is fully protected.
Whether or not you’ll need landlord contents insurance depends on what’s inside your rental property, and what’s covered by your building insurance. Check whether categories such as carpets and loose floor coverings, curtains and blinds, light fittings are covered under your building insurance – they may not be. A basic contents policy may be needed to cover these items. If your rental property is furnished, landlord contents insurance will protect furniture, appliances and utensils owned by you.
It’s worth noting that landlord contents insurance only covers items belonging to you. Tenants will need to take out their own contents insurance policy to protect their belongings inside your property.
What to look for in a landlord insurance policy
As a landlord, you want to make sure your investment property is protected. But every landlord insurance policy is different, so it’s important to do your research to make sure that you find a policy offering the cover that suits your circumstances. Here are some things to consider when shopping around for a policy.
- What is the excess on the policy?
- Does the policy cover rent default, and how much can you claim for missed rental payments?
- Does the policy cover malicious damage caused by tenants? (Does the policy also cover accidental damage).
- If you allow your tenant to keep pets, does the policy cover damage caused by them?
- Does the policy cover loss of rent if your property becomes uninhabitable due to flood or fire damage?
- Does the policy cover re-letting expenses after a claim on rental loss?
- Does the policy cover ‘change of lock’ expenses if your tenant fails to return the keys?
If you’d like some information about landlord insurance, or any other help managing your rental property, we’re here to help. Contact our expert team today.