Property investor numbers are at a record high, according to the Australian Bureau of Statistics. In January, new investor housing loan commitments rose more than six percent to $11 billion seasonally adjusted. Across the country, rents are up, with the average house costing $520 weekly.
Up to a fifth of Australian adults are landlords like you, according to Corelogic and the Australian Tax Office, and together that’s a vast pool of experience from which to draw.
This article shares must-knows about protecting your investment.
Landlord insurance: a quick overview
Typically, your tenant will pay a bond for any damage they cause, but the compensation won’t go far when you consider the overall value of your asset.
Savvy investors take out landlord insurance to cover:
- The building, such as for damage due to fire, theft, storms, etc, as well as their – not the tenant’s – contents like curtains, carpets, blinds and light fittings
- Their tenant’s intentional damage to your property
- Public liability and legal costs
- As an optional extra, loss of rent through tenant default, for example, and even Short-term rentals.
Landlord insurance, though, won’t cover you for wear-and-tear on your property.
1. Just because your property isn’t tenanted doesn’t mean it shouldn’t be insured
Standard policies offer cover if your property is unoccupied for up to 60 days. But there may be times it will be untenanted for longer, such as during major repairs, renovations, or a soft market for landlords.
You could be liable should someone be injured, or their property damaged, when they’re on your rental property, whether or not it’s tenanted. For example, consider if a prospective tenant checks out the premises and has an accident there. You could be up for a claim costing thousands, if not millions, of dollars.
It’s too risky just insuring your property only when it’s tenanted. Always avoid aligning your landlord insurance policy with a tenancy cycle.
2. Pets and change of locks aren’t necessarily covered
You might have agreed to the tenant having pets thinking it’s a sweetener to get a lease signed. Or maybe the tenant has pets but hasn’t told you. Check your state’s tenancy laws, such as this for NSW, about pets being prohibited or not on rental properties.
Check with us on whether your policy covers damage caused by pets – such as lingering smells, scratched floors or doors, chewed fittings, or stained carpets. You can add such damage to your cover, but the lease won’t need to list the pet’s name, nor are extra property inspections required.
Meanwhile, if a previous tenant has taken your keys, such as after an eviction or defaulting on their rent, you should change the locks immediately. If you forgo this, don’t assume your landlord insurance will cover the security of the property and for future tenants.
3. The difference between home and landlord insurance
However, some policies may cover you to install replacement locks when you must evict a tenant. That’s a benefit you won’t get with home insurance. Landlord insurance has been specifically designed to meet the needs of landlords, which a typical homeowner who occupies their home does not have (or need).
In comparison with home cover, here are some of the extras you tend to get with landlord insurance:
- Loss of rental income
- Legal expenses to evict your tenant
- Reimbursement to replace locks after evicting a tenant
- Dealing with malicious damage by a tenant.
4. You may not be covered for short-term rentals (like Airbnb)
Check with your insurer first before organising short-term rentals of your property – a higher premium may be required to cover the extra risks. Such risks include disruption to neighbours, tenants causing a public nuisance, safety issues, and possible extra wear-and-tear on the property. As well, your state or territory might regulate short-term rental accommodation and ask you to register, too.
Insurers need to sign off on this type of rental before you list your premises on portals, such as Airbnb.
5. Your premiums may be impacted by your area
Many factors can influence the premium for landlord insurance. Your location plays a part. Insurers tap into comprehensive data about rental default rates. If it’s high for your investment property’s area, the premium will rise accordingly.
Therefore, it pays to talk to us for advice on your options for landlord insurance coverage for your unique property needs.
This story first appeared in GIBA.