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What Is Landlord Insurance?
Landlord insurance covers the damages that tenants can wreak on your rental property. Depending on the policy, especially the basic policies, you may need to add additional extras or make a change to ensure the following items are covered:
Accidental damage by a tenant
Damage caused by a pet
Loss of rental income because a tenant broke the lease or defaulted
It is essential to understand that a dedicated Landlord Insurance policy is different to a Building Insurance Policy. We have found that many of the large insurers call their Building Policy a “Landlords Building Policy” however they do not include any of the standard covers an Owner would need in regards to tenant damage and default.
What Does It Cover?
Before signing up, check the exclusions precisely. Most insurance policies agree to cover the following situations:
Damage caused by the tenant, their guests, and their pets.
Public liability insurance in case of injuries to visitors.
Loss of rental because of insured events. This situation could include cover for tenant’s defaults, evictions, and death in persons without next of kin.
Expenses for re-letting the property after a rental loss.
The cost to remove the tenant’s items.
The cost of changing the locks after a tenant defaulted.
Legal fees that pertain to eviction and rental loss.
The cost of hiring a professional auditor for assistance with tax audits.
Exclusions include:
Basic maintenance costs.
Tenant’s cost of repairs claims.
Damage due to normal wear and tear.
Other standard exclusions in landlord insurance may include general maintenance expenses, the costs of repairs by the tenant, rental income due to not having a tenant, and general wear and tear.
Accidental versus Malicious Damage
A key item to check is what type of damage is covered, in many policies only malicious damage is covered. A large number of the major insurers who specialise in building, vehicle, health and contents insurance also offer a ‘Landlord Policy’ but these can be very limiting and only cover extreme levels of damage.
A majority of damage is accidental or amounts owed above the bond on vacate and it’s important that a comprehensive Landlord policy also covers accidental damage.
Benefits of Having Landlord Insurance
Landlord insurance is something that you hope never to have to claim against, but that’s not realistic with tenants today. No matter how carefully you vet your tenants, you have no guarantees that they’ll leave your place in good shape. You also can’t guarantee that they’ll never default.
Landlord insurance helps cover losses sustained due to tenants or their guests.
It’s wise to have adequate home and contents cover for guests staying over at the property. Even though a tenant is required to have their own contents if their items are damaged due to water ingress, mould, a collapsed ceiling and they feel you were negligent in your duties as an Owner, they might sue you for damages. Civil suits can quickly turn your dreams of owning an investment property into nothing.
Why take the chance when specialised insurance covers you fully?
Too often we see owners with out of pocket expenses as they have assumed they were covered by their Landlord Insurance only to find they are not. Ask your Property Manager for details of qualified and experienced insurance advisors who can assist you.
But please remember the choice is yours and to read the fine print to ensure you really understand what you are and aren’t covered for. Spending some time reviewing your insurance policies could save you thousands in the future.
We strongly recommend that you discuss your Landlord Protection Insurance with a qualified and experienced insurance advisor or broker (ideally before you arrange your cover).
About the author
Sian McDonald, Property Manager at Empire has been working in Real Estate for more than 5 years and has been with the Empire team for almost four of those years. Sian is energetic, knowledgeable, fun, friendly, offers amazing customer service, and epitomises our ethos of being everyday heroes…going beyond. Sian is an integral part of the Empire Property Management Team.
Need more information or can we help you with any other of your Property Management questions? Feel free to call and speak to us Empire Estate Agents to have a chat on (08) 9262 0400 or email reception@empireestateagents.com or www.empireestateagents.com