Article by latest.insure
Just over half of Australian landlords believe they are underinsured, according to an industry report.
Could you be one of them?
This assumes you’ve already secured landlord insurance to manage the financial risks of owning an investment property – or perhaps you’ve decided not to.
One of the most important ways to protect your asset is through landlord insurance, which offers specialised insurance cover for rental properties.
In this article, we’ll update your knowledge on the risks and responsibilities of being a landlord and how to manage them effectively.
What Does Landlord Insurance Cover?
Landlord insurance goes beyond standard home insurance by offering tailored protection for rental property owners. Here’s a look at what it typically covers:
- Tenant-caused damage
- Loss of rental income due to tenant default or property damage, and
- Liability claims if someone is injured on the premises.
For example, if a tenant accidentally damages the carpets or steals property, landlord insurance can help offset these costs. If a guest is injured and files a claim against you alleging negligence (for example, for failure to maintain or repair the premises), liability cover can protect you from expensive legal fees and claims.
Why Landlord Insurance Is a Must
Without landlord insurance, property owners could be vulnerable to financial losses.
The Australian Bureau of Statistics notes that rental vacancies have been at historical lows in recent years – just 1% in December. That’s roughly 65 potential tenants competing for every vacant property, depending on the local market dynamics. These figures reveal a strong demand for housing.
However, this does not eliminate the risk of income loss if a tenant defaults on rent or if repairs are needed before re-letting, which could delay securing a new tenant.
Landlord insurance can provide you with a financial safety net, protecting you from losses due to absconding or defaulting tenants. However, some exclusions will apply, so confirm with your broker or adviser what is covered in your policy.
Tenant Damage and Its Costs
Tenants don’t always leave properties in the condition they found them. Whether it’s accidental damage or malicious acts, repairs can be expensive, and the bond often doesn’t cover the full cost.
According to research by Finder, property owners without insurance often end up paying thousands out of pocket for such issues.
According to the property management sector, the most common types of damage tenants cause to rental properties include:
- Carpet damage – stains, burns, etc. beyond normal wear and tear
- Pet-related damage, such as scratches, and urine stains
- Wall damage, particularly holes, marks, or unauthorised paint jobs
- Floor damage, like badly scratched or gouged wooden floors, broken tiles
- Broken appliances or doorknobs, damaged kitchen fittings
- Damaged curtains, or broken windows
- Water damage from overflowing baths or indoor plants, and
- Burns or cuts on surfaces such as carpets or benchtops.
Landlord insurance typically covers repairs for tenant-related damage, helping ensure your property is quickly restored and ready for new tenants. However, it’s essential to note:
- Policy limitations: Not all types of damage listed above may be covered under a standard policy.
- Excess thresholds: Minor claims might fall within the policy excess, meaning they won’t be reimbursed.
Why Work with a Broker or Adviser?
To ensure your policy aligns with your specific needs and offers adequate protection, it’s wise to consult a broker or adviser. They can help tailor a policy that covers potential risks and secures your investment.
Legal Liability and Rental Properties
Landlords have a duty of care to maintain a safe environment for tenants and visitors. Accidents can happen, though, and you could be held liable for injuries on your property.
Landlord insurance includes liability cover, protecting you against claims and legal costs in these situations. This cover gives you confidence, knowing you’re protected from potentially expensive legal battles.
How to Choose the Right Policy
Every property has unique risks, which is why selecting the right insurance policy is so important. For example, properties located in areas prone to natural disasters, like flooding or bushfires, may require specialised coverage. A broker or adviser can help ensure your policy is tailored to your needs, including options for additional cover, such as protection for fixed contents like carpets or built-in appliances. Consulting with a broker or adviser is a smart way to secure the appropriate protection for your property.
When selecting a policy, it’s important to understand and compare coverage options for clarity on what’s included and excluded. Some common exclusions may include general wear and tear, or damage caused by pets. Increasingly, state and territory tenancy laws are making it difficult for landlords to discriminate against tenants with pets.
Taking the time to tailor your policy ensures you’re not caught off guard in the event of a claim.
Working with Your Insurance Broker or Adviser
Finding the best-fit policy is where we can help, as your insurance broker or adviser. We work with you to assess your needs, find the most suitable policy, and demystify the fine print.
Whether it’s understanding what’s covered or ensuring your policy aligns with your property’s unique requirements, we’re here to make sure your investment is well-protected.
