Why landlord insurance is essential for property investors

By Gerv Tacadena

It always pays to be hands-on when it comes to taking care of your investment properties. Aside from regularly checking if your property needs maintenance and repairs, you also have to be proactive in tending the needs of your tenants.

It always pays to be hands-on when it comes to taking care of your investment properties. Aside from regularly checking if your property needs maintenance and repairs, you also have to be proactive in tending the needs of your tenants.

Part of being a responsible landlord is making sure that your property is at its best shape for your tenants. However, it is also crucial that you protect yourself from the risks involved in renting out your properties. This is where having your properties covered with landlord insurance comes in.

What help does landlord insurance do?

Landlord insurance is entirely different from the range of home and contents insurance policies currently available in the market. While it is also designed to help protect your property, its coverage goes beyond what home insurance policies offer. Since landlord insurance is for an investment property, your policy premium is tax deductible.

What are the essential coverages under a landlord insurance

· Rental income losses

There are instances when, as a landlord, you suffer losses due to the inability of your tenants to pay rent.  Emergencies or unforeseen circumstances such as loss of a job or becoming ill can leave them unable to settle their rent for some time. In these cases, you might struggle to service your home loan, risking you to make defaults. Your landlord insurance can also help cover the loss of rent as a result of your sole tenant's death.

If a court order terminates the tenant's lease, landlord insurance can help you cover the losses you will have. You have to be aware, however, that some insurance policies do not cover all incurred losses.

· Property damage

One of the significant risks you face as a landlord is the wear and tear of your property at the hands of your tenant.

Damage to property is one of the most common insurance claims of property investors. Landlord insurance will cover any damage done by your tenant, both malicious and accidental.

Malicious damages include those committed by your tenants' friends, families, and house guests. It could be a broken door, shattered windows, cracked walls, vandalisms, or any other damages done by your tenant or their guests with spite.

Other damages are incurred though accident. Cracked floorwork due to the dropping of a heavy object is an example.

· Water damage

Another common insurance claim of property investors is water damages. There are two types of water damages: gradual and sudden.

Gradual water damage pertains to slow deterioration that starts small and gets worse over time. Corrosion is a typical example. Leaking taps and pipes, damages caused by water seeping from the cracks of the foundation and walls, and corroding roof are also examples of gradual water damage.

On the other hand, sudden water damages are those which are accidental. For instance, your insurance can help cover the cost resulting from your pipes unexpectedly bursting and leaking.

· Theft

Your landlord insurance will also be able to cover any losses due to theft or burglary. This is a must particularly to furnished rental properties. 

How much will your landlord insurance be?

Cost is an important thing to consider when thinking of getting a landlord's insurance. It is not practical for you to pay too much for a policy, as it will only take a large portion of your income.

But as with any insurance policy out there, you typically get what you pay for --- the most expensive will undoubtedly make the most value for money.

How much your landlord insurance will depend on several factors such as the location of your property, natural disaster risks, and crime rates. The cost of the policy also depends on whether you will be renting out your home furnished or unfurnished.

What should you consider when searching for a landlord insurance policy?

· Determine the level of insurance you need

Landlord insurance policies are not all the same. Each policy provider can offer coverage and protection that others cannot provide.

When looking for a policy, see to it that you know what you need. Do you want your protection to be limited to natural disasters, explosions, water damage, and theft?

You can also look at covering the content of your property, including the fittings, carpets, and other internal structures.

· Will you allow your tenants to have pets?

Pets present significant risks to the property. Dogs gnawing on doors and cats scratching on walls might eventually lead to damages that will require you to shell out some cash. Make sure to ask your policy provider if your landlord insurance covers damages due to pets.

· Check the location of your property

As mentioned earlier, one of the most critical factors policy providers look is the location of your property. Where your home stands can tell a lot about the risks you can face. If your property provides a stunning view of a lake, see to it that the area is not easily flooded. If it is, consider looking for an insurance policy provider which can cover damages caused by floods.

One final tip when looking for landlord insurance

The uncertainty of Australian weather conditions is a common problem amongst property investors in assessing the potential replacement value of the property. Fires and floods are two of the main culprits of property losses in the country. When these hit your properties, it will certainly not be easy to estimate the replacement costs if you are not organized.

Having a record of everything you own inside the property is encouraged. Include everything that is within the property. Keep receipts and photos as much as possible. Documenting will help you determine what level of protection you really need and will give you an idea on what to ask for from your insurance policy provider.

 

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