The importance of landlord insurance

The importance of landlord insurance

The insurance you need for an investment property differs from the insurance you need if you’re an owner-occupier. Landlord insurance provides cover and peace of mind from a range of potential problems, such as loss of rent, property damage or significant repairs that make your property untenantable. Keep reading below for an overview of why landlord insurance is important. 

You protect yourself and your property

Owning an investment property can be expensive. Not only do you need to make mortgage repayments, but you also need to ensure you have the funds to make repairs and cover regular maintenance. The unexpected can also happen in an investment property, just as in your home. Landlord insurance typically covers three areas: loss of rental income, contents cover, and building cover. You’ll be covered for a range of things in each area of cover:

• Loss of rental income: Protection from losses due to scenarios such as a defaulting tenant, failure of a tenant to give vacant possession, death of a tenant, a tenant’s financial hardship, untenantable property, prevention of access, and rent reductions.
• Contents: This policy covers furnishings, including curtains, carpets, blinds, and light fittings, from tenant damage, flood damage, storms or rainwater, and fires (including bushfires) or explosions. 
• Building: Loss or damage caused by tenants to the building, such as tenant damage, pet damage or scorching to fixtures inside and outside the property. This may include air conditioning units, heaters, plumbed-in dishwashers, pergolas, and awnings.

You can tailor your cover.

The level of landlord insurance coverage will depend on factors like how much you want to spend (though you should be careful of prioritising value over having adequate cover), the age of your property, and what level of coverage you want for your property. For example, for peace of mind, most landlord insurance policies offer a version of public liability insurance that will cover the landlord if a tenant is injured and it’s the landlord’s fault. 

Understand what isn’t covered

There are some things that landlord insurance doesn’t cover. These things include general wear and tear, damage caused by the landlord, and any damage caused by termites, rats or vermin. When you’re researching landlord insurance policies, make sure you check the terms and conditions to see what isn’t covered.

Landlord insurance is essential for property investors. It protects you from losses caused by anything from a tenant being unable to pay rent to storm damage. And as part of the annual expenses on your property, it’s a tax-deductible expense that will provide you with security and peace of mind if the unexpected happens. Make sure you research and speak to an adviser to pick the cover that’s right for you. 

Remember, this article is general in nature and is not financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.