When you invest so much in property to further your financial and capital growth you will want to ensure that you are protected. In addition to Building Insurance, Landlord Insurance is available to cover issues that specifically arise during tenancies.
Tenancies are unpredictable, no matter how well tenants are screened or what security measures taken, or how well a property is managed. With such uncertainty and instability in everyday lives, being aware of the options and cover available for those unexpected scenarios will allow you some control and relief knowing you are protected.
Regulated bodies such as the Australian Securities and Investments Commission (ASIC) and Consumer Affairs Victoria (CAV) among others, mention the importance of Landlord Insurance.
Cover will vary with different Insurers, therefore some research is necessary to find the best one to fit your requirements. The two most common risks are Loss of Rent/Rent Cover and Malicious Damage. Rent Cover as a bare minimum is recommended. A person’s circumstances can change very quickly due to loss of job, illness or other reason. Can you support the extra mortgage in addition to your other expenses if your tenant stops paying rent? Do you have a buffer available to draw upon? The dependence of investors on rental income is higher than ever before.
So to help you with choosing an Insurance provider, below are some important questions to ask:
– Under what circumstances the policy will cover the loss of rent, for eg. What if the fixed lease has expired and it is a periodical/month by month tenancy?
– How long does the cover last?
– Do they also cover re advertising and associated leasing costs?
– Vacant period costs and for how long?
– If a Tenant vacates due to Financial Hardship – are you still covered?
– How much is the excess?
Then there are times when a tenancy turns bad resulting in damage with malicious intent. Typically, both rent arrears and malicious activity go hand in hand. All it takes is a disgruntled tenant for whatever reason to put holes in the wall, break windows, burn something, graffiti etc. Just keep in mind, the key words here are “malicious” and “intent”. It may also be helpful to know if a police report is a requirement for a claim.
Another point to highlight is the difference between “malicious” and “accidental/unexpected/sudden” damage. This is damage that is not deliberate or malicious and can be described as wine spilt on carpet, a cracked floor tile where something heavy has been dropped. Such items typically are not covered under malicious and cover for these items would need to be discussed directly with your insurer.
There are also other insurance types available including Contents (properties rented furnished), Theft (of fittings or furnishings) and Illegal Drug Operations.
In all of the above instances it is very important to read the fine print including the Product Disclosure Statement and Policy Wording of the Insurer prior to making a decision. Please note, we cannot make this decision for you, but provide you with information to help you with this area that we believe is essential for any tenancy.
In light of the above and from our extensive experience, it is essential and most highly recommended that Landlord Insurance is secured for each and every property. It is a tax-deductable expense and well worth the cost to protect your investment from that one bad egg. Why take the risk?
Email Megan to talk about land lord insurance: MeganK@whitestar.com.au