What is Landlord Insurance and do I need it?

Property is one of the biggest financial investments you’ll make, so it’s so important to protect your investment with the right insurance.

When it comes to insuring your investment property, there are three main types of insurance you should consider – building, contents and landlord insurance.  Different insurance companies will have different names for these and some may offer combined policies but it worthwhile checking that your policy covers all three.

Building insurance should cover the replacement of the building structure itself, think things like the roof, ceiling, walls, doors and windows.  If you own a unit or apartment, chances are that the body corporate will have insurance which covers everyone’s building and also the common areas, so this may mean you wont need another building insurance policy.

Even if you rent out your property unfurnished, you still should consider basic contents insurance to cover your window furnishings, light fittings, floor coverings and whitegoods as these generally aren’t covered by your building policy.  Insurance companies tend to have a minimum cover amount of around $60,000 and this should be plenty.  Of course, if you do rent your property out with furnishings or have a high-end finish, you may need to increase this amount.

Now these policies usually should cover your building and contents for things like fire or storm damage.  But there are a range of tenancy situations that they don’t cover you for and this is where landlord insurance comes in handy.

Landlord insurance can cover unpaid rent

A tenant might have lived in a property for years and never missed a rental payment, but relationships can end, illnesses or injuries can prevent people from working, or a tenant may lose their job unexpectantly and be unable to pay rent.

A good landlord insurance policy should cover you for this loss of rent to a certain value, allowing you time to find new tenants and cover your mortgage repayments in the meantime.

Landlord insurance can help with property damage

Whether accidental, on-purpose or for reasons beyond everyone’s control, damage to a rental property can – and frequently does – happen.

Malicious damage, where holes are punched or kicked into walls, doors pulled off and curtains and carpets are damaged, is every landlord’s nightmare.  However, it can be far more common for accidental damage to occur.

Building insurance won’t cover this but the some landlord insurance policies should.  Also if your property can’t be lived in while it is being repaired, landlord insurance will often also cover the loss of rent.

Some policies will also cover you from damage from pets, so if you have a pet friendly property then it’s worthwhile making sure your policy offers you cover for this just in case.

Landlord insurance can help with legal liabilities

Many people may not realise that they have a liability risk from the time their property is advertised for rent and open for inspection.  Check that your insurance includes public liability cover which is insurance for you in case a tenant or visitor injures themselves at your property and decides to take legal action against you.

These are just some of the risks that Landlord Insurance can cover you for but remember that insurance policies do vary, so make sure you do double-check the fine print and always seek professional advice.