Landlords with a residential property rented out need insurance for the building as well as any contents provided for the tenants. However there are a range of other risks involved in renting out a property that a landlord needs protection for. They include loss of rent if the building is damaged and becomes uninhabitable, intentional damage by a tenant or their guests, tenants that disappear once they get behind in the rent, and legal liability if a tenant is injured.
Why Landlords Insurance Should be Taken Out
The major reason most people invest in residential property is to create income. Therefore it makes sense to have insurance that protects the rental income a property generates, as well as the property itself. Most tenants treat the property they are leasing with reasonable care, but there are people who will deliberately cause damage, and intentional damage is not covered by standard home insurance policies.
The two most significant risks facing landlords are intentional or malicious damage by tenants and failure to pay rent. Standard building and contents insurance policies will not provide cover for these two risks, but special Landlords Insurance, also known as Residential Investor Insurance, will.
What is Included in a Landlords Insurance Policy?
Landlords insurance policies vary between different insurance firms but common features include:
- Malicious or intentional damage to the property by tenants or their guests
- Theft by tenants or their guests
- Rental loss rent due to damage by an insured event (there will be a time limit for this which is often to a maximum of 12 months)
- Rental loss due to death of a sole tenant (normally up to 2 weeks rent)
- Rental loss if the tenant defaults on their payments or is legally evicted (limits apply)
- Liability, which includes any claim against you by the tenant
- Legal expenses incurred through taking action against tenants (to a specified limit of generally $5000)
Landlords Property Insurance Policies can be Stand Alone or Added to an Existing Policy
All landlords home insurance policies are not the same. Some are designed as additions to a normal household building and contents or strata title policy, while others are more comprehensive. Some residential investor insurance will provide cover for the contents of the property, which is particularly important for those who rent out a partially or fully furnished property.
If an investment property is a strata title unit, the Body Corporate is responsible for insuring the building. However the landlord should check the Body Corporate insurance to find out what kind of cover it provides. Generally Body Corporate insurance offers cover for buildings, but not contents like carpets or blinds in your unit, so landlords insurance will be required to cover this.
Landlords should not skimp on getting a policy that is adequate for their needs. Also remember that home insurance for landlords taken out to cover a tenanted residential investment property can be claimed as a tax deduction in most circumstances.
Jo Jackson - Jo is an Australian writer with an MBA and a B.Sc.(Hons) in botany. She has wanted to write since she first discovered books and currently ...
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