If you own an investment property that you let out as a rental, you might just benefit from taking out landlord insurance. Landlord insurance keeps your income stream and your property well protected throughout the year, minimising many of the stresses associated with rental properties.
With so many different types of insurance available, we know just how confusing it can be for you. So to help clear up any confusion and point you in the right direction, we’ve pulled together this guide about why landlord insurance is so important.
What Exactly is Landlord Insurance?
Landlord insurance is pretty much self-explanatory. Just as contents insurance covers content, landlord insurance covers all of those areas surrounding renting out your property to tenants. It’s a specific type of policy that covers property owners for a whole host of risks.
In a perfect world, tenants would always pay their rent on time and your property would be kept in an immaculate condition. To be fair, most tenants are respectful of payments and property, but there’s always going to be a small handful who don’t.
Think of landlord insurance as being a safety net that minimises the impact of missing rent payments and damage both from humans and natural disasters.best of all, it tends to be extremely affordable. For just a few hundred dollars a year, you can enjoy absolute peace of mind – which as a property owner is priceless!
Each insurance provider covers different things, but there are a few that are the same across the board:
Accidental Damage
It’s an unfortunate fact, but accidents happen. A glass of vino spilled on a carpet, a leaking washing machine or a burn in a countertop from a hot pan – all of these simple acts can destroy your property and its furnishings. Depending on the type and extent of damage caused, repairs can start to spiral. Carpets don’t come cheap – neither does a new ceiling.
Landlord insurance that includes liability cover and accidental damage can save you plenty of dollars in the long-term. Of course, exactly what is covered will depend on the policy provider. Not all of them will cover water damage or glass breakage, so make sure you read the small print and have all bases covered.
Some of the main things it will cover include:
- Broken windows and door locks
- Carpets and flooring
- Flooding from laundry machines
- Natural disasters such as flooding or fire
Malicious Damage
Luckily, the majority of tenants are reasonable people and don’t set out to cause damage and destruction on purpose. However, that’s not to say that everyone is made equal.
Miscommunication, reprimands and frustration can turn a level-headed tenant into a wrecking ball. From broken doors and windows to kids drawing and scratching on walls and surfaces – damage is never a good thing.
When looking for the best landlord insurance, take a close look at the policy disclosure statement to check if it’s included. Not every insurer is prepared to offer it while others may charge a premium for it.
Some of the main things it may cover include:
- Theft of property from the building
- Vandalism or malicious damage
- Legal expenses for evictions
Non Payment of Rent
Depending on the type of policy you have, some will cover rental payments in the event of damage repairs needing to be performed. Typically, this will leave the property standing empty for extended periods of time. If you’re covered, you’ll receive rent payment equivalents until new tenants move in – sometimes for as long as up to one year.
If covered, landlord insurance will also typically cover defaulted rental payments, court-ordered evictions and loss of rent due to the death of a tenant. It’s also not uncommon for representation fees and legal costs to be covered when pursuing a tenant for unpaid rent through the courts.
What Doesn’t Landlord Insurance Cover?
There are a few things that the majority of insurance policies won’t cover.
- General wear and tear to the property and its fixtures.
- Loss of rental income due to no tenancy.
- Tenant-paid repairs or replacements to damage.
- General or routine maintenance expenses.
There are also a variety of inclusions you should consider if you want to enjoy maximum protection. Some insurance policies will include these as standard, but they are often optional inclusions. Choosing to add these may result in higher premiums and payments but will often pay for themselves in the event of a claim.
- Property or equipment damage caused by a pet.
- Expenses for re-letting after making a rental loss claim.
- Changing of door locks are making a rental claim.
- Legal costs for making rental claims in court.
- Increased rental cost payment thresholds.
- Removing tenants possessions after a rental loss or a claim.
- Public liability cover for visitors to the property.
How Much Does Landlord Insurance Cost?
Asking how much does landlord insurance cost is like asking how long is a piece of string? The total cost will depend on the provider, the property value, whether you allow tenants to keep pets in the property and the location. Optional inclusions can push the price up, but in many cases, are well worth it.
To give you a better idea of what you’ll most likely need to pay, $400 a year is a good estimated average price. This may seem like a lot for some, but for the equivalent of $33 a month, the return coverage you get ensures you are well-protected and never at a loss in the event of a claim.
It’s important to remember that cheap isn’t always the best option. Unfortunately, when it comes to insurance, you get what you pay for. Is it really worth losing $1000’s in defaulted rent payments just to save $3 a month? How much would it cost to refit carpets in a flooded home? Weigh up your options, know what your biggest losses are likely to be and then take opt to add the most beneficial inclusions to your policy.
Make the Most of Your Rental Properties
Trying to manage your investment properties can be hard work – especially when you face issues with tenants. At Leased. our property management professionals take care of the everyday running of rentals and tenancy agreements so you don’t have to.
Issues with non-payment of rent? Struggling to find the right tenants to move in? Unsure of how to navigate recent changes to Australian rental laws? Let us help you get the best returns on your investment properties and enjoy a stress-free, streamlined experience.
Make the switch today and join Leased.