Landlord Insurance

Insurance is one of those topics that makes many of us ‘sigh’, it costs us money, there is an ever-increasing range of insurance products, and it seems to continually rise. When it comes to budgeting, it can be tempting to cut back insurance or let some policies lapse altogether; however, when it come to Landlords Insurance, this is an absolute essential for anyone owning an investment property and should be a non-negotiable when looking at any cost-cutting.

Why should I invest in a specialist landlord insurance policy?

Renting out a property comes with its financial rewards, but also its risks.

Unlike a typical home and contents policy, a landlord insurance policy offers protection for tenant-related loss and damage. This means if a tenant defaults on rent or causes damage to the property, landlords may be able to recoup costs through their insurance policy.

Weather events: just recently we have witnessed the widespread damage and devastation caused by flooding in Queensland and NSW; weather is unpredictable and can be catastrophic to the structure of a property. Ensure your landlord insurance provides you with cover across a range of natural disasters and risks including storms, hail, floods, cyclones, and bushfires.

The Insurance Council of Australia reported that the 2021 flooding in NSW and southeast Queensland led to in excess of 42,000 claims submitted, totalling around $624 million. As wild weather conditions are expected to continue in 2022, bringing cyclones, severe storms, and bushfires, property owners should consider the risk of being financially exposed to substantial damage or total losses by being uninsured.

Just like the weather is unpredictable so are tenants. You cannot control a tenant’s job loss, relationship breakdown, or health issues. The major players in the landlord insurance market report that approximately half the claims they receive concern a tenant related matter like loss of rent, damage, and theft.

Do not be lulled into a false sense of security that the bond will cover any tenant-related risks.

In many cases, the bond that has been collected will not be enough to cover the expenses if a tenant refuses to pay rent, damages the rental property, and fails to make good on their obligation to repair the damage, or steals contents from the premises. This leaves the landlord to foot the bill and then chase the tenant for reimbursement through the courts, which can be an expensive proposition.

Another important key feature of landlord insurance policies is a legal liability (also known as ‘public liability’ or ‘liability to others’) and cover limits are usually in the tens of millions of dollars. Landlords have a responsibility to provide a safe and liveable property for tenants and anyone else who visits the premises. This means they must take care to avoid foreseeable harm to tenants or other visitors. Harm could be a physical injury or damage to the person’s property. If the landlord is negligent in this responsibility and someone suffers a loss as a result, the landlord will usually be held liable and may be required to pay compensation.

In summary, the bottom line is, that as a landlord, it is important to protect your asset and the income you are set to derive. A specialist landlord insurance policy is an important part of an investment strategy.