Understanding how Landlord Insurance works
Property can be an excellent long-term investment, but it doesn’t come without risks. As a landlord, it’s important to understand how Landlord Insurance works.
There can be a chance your tenants may default on the rent, steal items from the property or cause damage that their bond may not cover.
The rental income you rely on to pay the mortgage could disappear if a natural disaster renders the premises uninhabitable for an extended period of time.
That’s where landlord insurance comes in.
Understanding how Landlord Insurance works
It’s a specialised form of insurance cover designed to protect property owners who rent out commercial or residential properties by mitigating some of the most common risks associated with being a landlord.
The cover you’ll receive depends on the policy that you take out, but your landlord insurance policy may include:
- Automatic cover for flood, fire or explosion
- Liability cover for injury or loss of life to a third party or their property
- Cover for to landlord’s contents – like carpets, curtains, washing machines and ovens
- Catastrophe cover
- The option to cover loss of rent
- Loss or damage caused by tenants or their visitors
- Electric motor burnout
- Tax audit cover (up to $5,000)
- Extra cover for demolition and debris removal
While having a landlord insurance policy is not mandatory, it’s highly recommended by real estate professionals and financial institutions who’ve seen landlords suffer significant losses and hardship from tenant-related events.
What’s typically covered in a landlord insurance policy?
A landlord policy typically comprises a combination of building, contents and landlord insurance.
Property damages from natural disasters (such as fire, flooding and storms) are likely to be covered, as are possessions kept on the rental premises for maintenance purposes, such as tools and gardening equipment.
The landlord component of the policy typically covers loss of rental income if the property becomes uninhabitable. This could happen as the result of a covered event, rent default, damage or theft by tenants and their guests, liability in the event of an accident, and legal expenses, if necessary.
What landlord insurance doesn’t cover are the regular costs associated with being a landlord.
This could include construction defects, normal wear and tear, and ordinary expenses, such as plumber’s bills for clearing drains.
Cover when it counts
If you’re a landlord or considering becoming one, it’s a good time to consider the benefits of landlord insurance. It could also be worth reviewing your level of cover to check it remains right for your circumstances.
