Purchasing an investment property can be an exciting step in life and it can be overwhelming as you work through the steps of tasks that you need to have organised to ensure that your property is ready for new tenants.

One factor that is often overlooked is landlord insurance and how important it is in covering you in case the unplanned happens during the lifetime of your investment.

What is landlord insurance

Landlord insurance covers the rental property for the duration of a tenancy and between tenancies for unforeseen events that may occur at the property. It will cover incidents like damage, theft, costs associated with a lease break, rental default and any eviction costs that may be required.

A good policy will also cover public liability in case anything should occur to the tenants and guests on the property as well as for storms, fires, and floods.

Risks versus benefits

Any investment comes with risks and while you may be lucky to have an investment that never has defaulting tenants or damage to the property via the tenants or weather events, there is always that element of risk in the what-if. 

The benefits of landlord insurance are the protection against the unknown, especially in changing markets. While your property manager can thoroughly check applicants prior to approval for tenancy, we can’t always predict what may happen, and this is where insurance will cover if the tenant stops paying their rent, breaks the lease or damages the property. 

A good policy will also protect in cases of strata buildings. A strata building insurance policy will only cover building facilities and not the individual apartment. Should an incident like flooding occur from a burst pipe or mould takeover, you would need to defer to your own policy to cover the cost of contents repairs and potential compensation to the tenant. 

In cases of damage by the tenant, remember that only the equivalent of four weeks is collected from the bond and in the worst case, this may not cover any rent arrears, cleaning, or damage.

The costs of the investment 

There are many specialised landlord insurance policies on the market and the costs for the policy will vary depending on the area that you are in and the value of the property. 

It is wise to shop around for a good insurance policy that covers the protection over the investment and look for one that covers loss of rent, pet, malicious and accidental damage as well as natural or otherwise disaster events.

Don’t forget to check the excess in addition to the premium, a lower excess may mean a higher premium and that is worth weighing up. 

If you would like to know more speak with one of our property management team who would be happy to help. 

Related reading: Should I get landlord insurance

Thanks for reading.

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