One of the most important items a property investor can purchase is a landlord insurance policy. Some landlords tend to opt out of insurance not knowing how much they can save in the long run. Why is landlord insurance important? Not only will you be covered for contents and public liability, but you will also be covered for default rental payments and malicious damage caused by your tenants.
When you are selecting a landlord insurance policy it is important to ensure you have adequate coverage. Insurance policies can vary significantly in both price and offerings.There are several things you should ensure you will be covered for and these are below:
Acts of Nature
First off, ensure that you are covered for acts of nature as these can strike any time and can cause a massive wreck to both your property and your budget. Here’s a list of the events to check coverage on:
– Storms (including damages caused by lightning strikes)
– Flood – be particular with the ‘type of flood’ as some policies may not cover floods from overflowing rivers
– Tsunami and ‘ocean movements’
– Civil unrest and rioting
Make sure you know what your building coverage will pay for. You should expect the buildings policy to cover for the structure of your property, which includes the following:
– Fixed appliances
– Pipes and cables
– Gas or plumbing systems
– Exterior blinds and awnings
– Some external structures
– Fixtures and fittings
Other things that your building insurance should cover you for are:
– Complete or partial destruction of the property
– Loss of rent during the time that the property is uninhabitable
– Damages caused by the tenant or tenant’s guests under a landlord’s building’s policy
As for units, it is a bit more complicated as the building itself is typically insured by a body corporate, which means that you have no other choice but to depend on their insurance when there are damages to structures. Nonetheless, you can purchase a ‘strata title protection’, a specialist insurance which will back you up in case the body corporate is underinsured.
This covers the items that are not considered as part of the structure itself, namely:
– Internal blinds
– Light fittings
– Domestic appliances and utensils
– Household goods
– Loose floor coverings
It only covers items owned by the landlord, not those owned by the tenant. Mostly, you will be covered for the property damage caused by the tenants and/or guests, however, some insurance providers may require you to purchase a premium for this.
For units, it usually extends to fittings and fixtures. White goods are usually subject to claim limits, as well as contents that are kept outside.
Of all the aspects of the landlord’s insurance, this is – by far – the most important as it protects you against loss of rent. However, not all insurance policies cover all eventualities, but still they should protect you from the following cases (at least):
– Tenants obtaining a hardship order
– Tenant eviction due to a court order
– Tenant’s unexpected death
Extras and Incentives
In addition to the primary benefits listed above, some policies offer extra coverage such as legal liability, worker’s compensation, replacement of keys and locks, tax audit, pet damage and automatic indexation of insured value.