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What is Landlords Insurance and do I need it?

what is landlords insurance and do i need landlords insurance

If you currently own an investment or are thinking of becoming a landlord, it is important to take note of potential risks present in the industry and how to best protect both yourself and your property against these risks. One of the key considerations to make is whether or not to take out landlords insurance. In this article, we will go into detail around what landlord insurance is, what it can cover and things to look out for when shopping around for landlord insurance.

What is landlord insurance?

Landlord insurance is a specialised insurance policy designed to protect landlords and property investors from risks associated with being a renting out a property to tenants. This type of insurance can cover you from damage to buildings and contents, but also rent arrears, damage by tenants and legal liability.

As a landlord, you are essentially running a business and your biggest asset is the property you are renting out. As such, it is important to protect your assets from damage and keep your source of income protected. Landlord insurance can help to give you that piece of mind.

What can landlord insurance cover?

While exact coverage is dependent on particular policies offered by insurance companies, generally landlord insurance can cover a lot of different eventualities, including:

  • Natural disasters: such as fire, flood, storm damage, earthquakes, tsunamis etc.
  • Damage to buildings: such as pipes, cables, fixed appliances, external fittings etc.
  • Contents: such as carpets, curtains, furniture (provided by the landlord), light fittings etc.  Landlords insurance will usually only cover contents belonging to the landlord
  • Rent arrears: when the tenant does not pay rent on time due to default, court order, unexpected death etc.
  • Malicious damage caused to the property by tenants
  • Loss of Rent : in the event the house becomes uninhabitable due to such things as fire or flood

Some landlords insurance policies will cover all of the above items in a single policy, while other insurance companies will offer a base landlords insurance policy for building and contents, and then allow you to select whether you would like additional coverage for say, malicious damage caused by tenants or rent default.

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Things to look out for with landlords insurance

As a general guide when shopping in the market for insurance (including landlords insurance), there are a few factors to look out for:

Check exclusions on your policy

There have been situations where landlords have been caught out by exclusions in their policies (think Brisbane floods). This is especially important if your property is in a high risk area for natural disasters, for example earthquakes, flood or tsunami risk. You may find that you have to pay a higher premium to be covered.

Double check the ‘stand down period’

Many landlords insurance policies will, for example, only pay rent default losses in excess of four weeks rent.  In addition some landlords insurance policies may have a cap on the amount of rent default (or other losses) that can be claimed.  For example rent default may be capped at 3 months rent or $10,000.  That being the case, make sure to account for the stand down period when you are budgeting money for unexpected expenses. One way to protect yourself against the stand down period is requiring a bond or security deposit from the tenant (equivalent to a certain number of weeks).

what is landlords insurance

Bundled Policies 

Save on premiums by bundling policies – sometimes, if you have existing insurance cover with a company (for example, home, health, or contents insurance), you can negotiate a bundle price with discounts on the overall cost of the premium.

Level of cover

Make sure you evaluate thoroughly how much cover you need in order to ensure you are fully protected. The last thing you would want is to be underinsured at the time of making a claim.  Also check when and how to make a claim. Many insurers have processes on their websites or in the policy contracts.

Conclusion

Landlord insurance can be a great way to ensure that your investment is protected from the risks of the rental market. It is important to do your research and find a policy which suits your budget and your needs.

Woolworths in Australia now offer landlords insurance.  You can get a Quote here.

If you need any further information on insurance, you can check out the Insurance Council of Australia’s website here.

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About the author

Craig

Craig is an Australian Expat and the founder of The Australian Expat Investor. Craig is passionate about investing, and while Craig cannot give personal financial or tax advice, Craig enjoys sharing investing, tax, and other tips for Australian expats to help them to build their wealth while living abroad and get the most out of their time living overseas. Get his free ebook on 9 Financial Surprises That Could Cost Australian Expats Thousands of Dollars

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