What to look for in Insurance Policies

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Question: I’ve recently purchased an investment property – what should I be looking for in an insurance policy?

Answer: By Carolyn Parrella, Executive Manager, Terri Scheer Insurance

While ownership of an investment property can provide significant financial benefits, many landlords want assurance that their property will provide rental income. Seeking a specialised form of insurance cover can protect investors from many of the risks associated with owning a rental property and help provide that peace of mind should the unforeseen occur.

The most common risks for a landlord are loss of rental income, malicious damage by a tenant, theft, accidental damage and legal liability. Even the most reliable tenant can damage a property, whether accidental or otherwise, which can be extremely costly for the landlord in terms of repairs and the loss of rental income.

When choosing insurance, landlords should consider a policy that has been specifically designed to address these needs. Key clauses in an insurance policy for landlords should cover the following risks.

Loss of rental income
Loss of rental income can result under a number of circumstances, including absconding tenants, defaulting payments, death of a sole tenant, failure to give vacant possession or a court awarding a tenant a release from lease obligations due to hardship. In instances where malicious damage has been caused to a property, a loss of rental income may
result during the time required for the property to be repaired or cleaned. Choosing a policy that covers these incidents will help ensure the landlord continues to receive a rental income.

Malicious damage by a tenant
Malicious damage covers everything from holes punched in walls and doors that have been kicked in, through to intentional damage to carpets and floors.

Accidental damage
This covers unintentional damage to a property. It might include the accidental breakage of a window or the spilling of red wine on a white carpet. Accidental damage may also cover damage caused by small children, but does exclude gradual ‘wear and tear’ that has been sustained over time.

Legal liability
This covers expenses incurred if a law suit arises as a result of a tenant suffering bodily injury, property damage or loss where the landlord is found responsible.

Tax audits
Some landlord insurance policies cover landlords for up to a certain level of professional fees relating to an investment property audit undertaken by the Australian Tax Office.
An insurance policy that covers these specific risks can assist landlords to safeguard their investment and ensure they continue to receive rental income.

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Carolyn Parrella

Carolyn Parrella joined Australia's leading landlord insurance specialists, Terri Scheer Insurance, in 2004 and was appointed Executive Manager in 2009.
Carolyn oversees all operations within business, which aims to protect landlords against the risks associated with owning a rental property. These include malicious damage by tenants, accidental damage, legal liability for occurrences on the property that cause death or bodily injury, and loss of rental income as a result of damage to a property or a tenant absconding.
As a South-Australian based national insurance firm, Terri Scheer Insurance is the only company in Australia to specialise solely in landlord insurance.
Carolyn also owns two investment properties.

For further information, visit www.terrischeer.com.au or call 1800 804 016. 

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