If you own a rental property, you may need different insurance products than normal home and contents policies. This is because you are exposed to additional risks to your property such as accidental damage and misconduct by your tenants. By getting landlord insurance, you can protect yourself from a variety of costly scenarios with a policy that is specially related to risks involved in leasing property.
What Does Landlord Insurance Cover?
While most general home and contents insurance policies will typically cover you for things like damage to the building, some contents like flooring, window dressings, fixtures and fittings, as well as natural disasters like fire, flood and storms, they won’t protect you against incidents related to your tenants.
Landlord insurance can cover you in case of:
● Claims brought against you if a tenant injures themselves on your property
● Vandalism and malicious damage by tenants or their guests
● Loss of rent if tenants leave your property without paying
● Legal expenses if you decide to take action against a tenant.
Landlord insurance is not compulsory and while it comes at an additional cost, many landlords find it’s well worth it for peace of mind. If disaster strikes or you find yourself with an irresponsible tenant, you won’t find yourself significantly out of pocket.
Covering Missing Rent
Many landlords rely on rental income to pay their own debts such as a mortgage on the family home. If missed rental payments cause you financial stress, look for an insurance policy that will cover you for loss of rent. Landlord insurance can also cover the loss of rent that you might experience because damage has left your property unable to be leased.
Some landlord insurance will even include the cost of replacing locks on the property if your tenant has vacated the premises and failed to return the keys. Depending on the policy, landlord insurance may protect you from rent loss due to tenant hardship, which occurs when a court releases your tenant from their obligation to pay rent for a certain period of time due to hardship. For example, if they are unable to work because of illness or injury.
Check What Your Policy Covers
Insurance policies can differ wildly. Some landlord insurance is meant to be taken out in addition to a general home and contents insurance policy. Other times, landlord insurance policies are more comprehensive and in addition to what’s outlined above, they can cover things like:
- Natural disasters
- Impact damage, such as from trees and car crashes
- Water damage from leaks, bursts or overflows
Depending on the policy, they may cover both outside and inside contents like BBQs and outdoor furniture. Insurance doesn’t cover anything growing out of the ground like trees, plants, grass or shrubs.
Landlord Insurance and Strata
If your investment property is a strata managed apartment or townhouse, you may already have landlord insurance. Ask your body corporate whether this is the case and what you are covered for. Typically, you will be covered for the building and legal liability for public areas. You may need to take out additional coverage for things like loss of rental income. Usually, you’re also not covered if an event occurs within your property, both in terms of damage and liability.