Why landlord insurance is critical through a pandemic
The cost of owning an investment property can build up and it's easy to feel concerned that you're not getting ahead financially. We are always motivated to help our clients maximise return on investment, but one expense we don’t recommend avoiding is landlord’s insurance.
What is landlord’s insurance?
You may already have building or home and contents insurance on your investment property, to protect it from damage caused by fire, flood, theft etc.
Landlord’s insurance takes things a step further to cover the specific risks involved with leasing a home to others. Your landlord insurance will help to cover the costs of damage to the property and also take care of a gap in income created by loss of rental income, default on rental payments or the cost of taking a tenant to the tribunal.
Landlord’s insurance is tax deductible, which minimises the cost of having a policy.
Is landlord insurance worth having?
Owning an investment property comes with risk. Having insurance gives you peace of mind that you won’t lose thousands of dollars because something goes wrong.
Consider, for example, that your tenants have a friend come to stay who is less than trustworthy. A session with a few drinks gets out of hand and all of a sudden there is serious damage to the wall. The friend takes off so it is hard to point the finger of blame directly at the tenant. Having insurance gives you a safety net to take care of the cost of repair.
Landlord’s insurance also protects you from being sued by a tenant. Let’s say the worst happens and your tenant is injured while on the property. For whatever reason, you’re the one at fault (even if you had no idea they were at risk). You don’t want to be left with a huge bill and no option but to sell the property to cover the expense.
With the pandemic still taking a toll, another big reason to have landlord’s insurance is to protect you from loss of rental income. If your tenant loses their job or falls ill for a long period of time and is unable to pay the rent, you still have to pay the mortgage on the property. Landlord’s insurance will protect you from loss of income if a tenant defaults on their contract.
Don’t forget to read the fine print
We agree that landlord’s insurance is worth having but make sure you shop around and take out a policy that has you fully covered.
Your insurance should protect you from the following:
- Accidental, malicious, deliberate and intentional damage to building and contents
- Theft by tenants and from intruders
- Damage caused by flooding, storms, fire etc
- Tenant rent default for more than a short period (e.g. a policy which gives you at least three months of cover gives you time to find new tenants if your existing one breaks their contract)
You should also be clear on whether or not the policy covers the following (it’s unlikely that it will but knowing the details will help you have other stop-gaps in place)
- General wear and tear from the tenants living in the property
- Repairs and maintenance
- If you damage the property yourself, or someone damages it under your instruction
- If you breach the leasing agreement instead of the tenants
- Damage caused by pests
- Damage caused by pets
At Complete Real Estate, we manage many rental properties for our valued clients, and we can help you find the right investment property for your needs, too. Contact us today if you would like to find out why now is such a great time to buy in Mount Gambier.