Property managers usually advise their landlord clients to obtain landlord insurance for their rental properties. Most landlords see the immediate need, others need to be persuaded. Some property managers report resistance from landlords, with the attitude ‘Well if you were a good managing agent, you wouldn’t tell me I needed insurance’. An analogy to use is, even if we are the best driver in the world, we still need car insurance, for the many things that can go wrong when we are on the roads.
Being a landlord can be an expensive business, as any investor knows, and if you haven't got the right cover you'll have to foot the bill if things go wrong. It’s not a legal requirement in the tenancy agreement that the landlord must have insurance, however if the property is mortgaged, it may be a requirement of the loan that you have appropriate insurance.
Not all landlord insurance is the same, so you need to investigate the ‘fine print’, however the basics are usually:
Landlord’s Building Insurance:
For example, if your property suffers a flood or fire, buildings insurance will cover the rebuilding costs. This usually includes replacing kitchens units and bathroom suites. You need to check if a policy covers outbuildings such as garages or sheds.
Landlord’s Contents Insurance:
This covers the landlord’s possessions only (not the tenants). In a strata property, for example, the building insurance usually does not cover the paintwork, window furnishings or floor coverings in the unit. In the event of a fire in the unit, the landlord can be seriously out of pocket by the time they pay to repaint the walls as well as replace the flooring and blinds.
Landlord’s Liability Insurance:
This will cover you if anyone is injured or killed on the property, for example if there is an electrical fault and the tenant is electrocuted.
Loss of Rent Insurance:
If your property becomes uninhabitable for any reason and you can’t rent it out for a certain period of time, any rent you miss out on can be protected by loss of rent insurance.
This is particularly important if you have taken out a large mortgage on the property, and are relying on the rent to meet the monthly repayments.
These are the basics that most landlord insurance covers, but you will need to read the policy to ensure the coverage is adequate for you. Real estate agents are not qualified to advise you on insurance matters, so you should consider getting specialist advice if you have specific circumstances you need to consider. You also need to read the documentation, as with some insurance policies, there can be specific requirements to be able to claim, such as the existence of a current lease.