Understanding your home insurance options
Home insurance is, for many, a necessary evil. When renting out a property, you want to be protected against any financial losses. Yet, it can be difficult to justify paying for something that you may never actually use. Depending on your level of coverage, landlord insurance covers your property, any furnishings you have provided for it, any loss of rental income that might occur, and any claims from tenants injured on your property (at your fault).
In short, if you have any trouble with your rental property, you won’t have to pay it out of your own pocket. Instead, your landlord insurance will cover costs for any damage or financial loss that you may experience. However, not all insurers will cover the same and you have a few options to choose from. Let’s have a look at them.
What is landlord insurance?
Landlord insurance is a type of specialised home insurance for rental properties. This can include the building itself, it’s contents (any furniture or assets that belong to the building), liability insurance in case anything happens to a tenant while on your property, or unoccupied property cover.
What does landlord insurance cover?
What your insurance covers will naturally depend on your insurer and the policy you choose. However, most landlord insurance policies will cover:
- Water damage, storm and rain
- Impact at home like fallen trees
- Burst pipes and damage caused by the event
- Protection against vandalism
On top of this list of usual suspects, you can often choose a variety of add-ons with your landlord insurance. Some of these include:
- Natural catastrophes including flooding and fire
- Cover of rental income in case of damage
- Rent arrears
- Loss of income during vacancy periods (check with your insurer, many have changed their policies due to the recent COVID-19 pandemic)
- Any furniture or features like kitchens, carpets etc.
- Damage by tenants
How does landlord insurance work?
Landlord insurance works similar to home insurance but comes with additional features in case a tenant maliciously or accidentally damages your property. You can choose if you want to insure the building, the content of your building including furniture etc. or both. Multiple factors will influence the price of your landlord insurance:
- Is your property occupied or currently without tenants?
- How high is the risk of any natural hazard?
- How likely is it for your property to get maliciously damaged?
- What’s the value of your property and its contents?
- How much would you be paid out?
- Is your property residential or rented out for events?
Each Australian state has its own insurers that are specialised into the specific environment and the damages that can come with it. If you live in an area that is prone to flooding, you may have to pay higher premiums. However, you can enjoy peace of mind knowing that your property will be safe in case anything happens. The best benefit of having good landlord insurance is that you won’t have to pay for any damage out of your own pocket and your cash flow is secured, even in the event of serious damage.
Do I need landlord insurance?
It isn’t a legal requirement to get landlord insurance for your rental property. However, if you want to play it safe, it could be the best way to protect your property against any eventualities. There is a lot that regular home insurance won’t cover, especially when it comes to accidental or deliberate damage by tenants. Why is that the case? In many instances, home insurance won’t cover you if you don’t live in the place yourself, especially when it comes to maintenance. A tenant may not be as attentive as you would be and may delay reporting an issue, which could lead to damage.
Ultimately, we’re not financial advisors. So, it may be worth getting a landlord insurance quote from different insurance providers to weigh up the cost/benefit to you. You might also wish to consult a qualified financial advisor for professional advice.
Different types of landlord insurance
You can typically choose a different level of insurance with your landlord insurance policy. What type of insurance you need may depend on a variety of different factors. Here’s a breakdown of the two most common types of cover:
Landlord buildings insurance: This insurance will cover you for loss or damage to your building, including damage as a result of fire or floods. However, not all policies will cover malicious damage. It is worth checking if any destruction caused by tenants is covered.
Landlord contents cover: This insurance will cover you for loss or damage to the contents of your property. If you rent a furnished place or have any furniture or features within your rental property, it may be worth considering this type of cover. Naturally, tenants are responsible for insuring any of their own belongings.
Has COVID-19 affected landlord insurance?
The recent COVID-19 pandemic has caused some insurance companies to change their policies. After the National Cabinet put a six-month ban on evictions in March 2020, the cover of tenant-related risks has significantly changed. While many Australians have been stood down and struggled to pay rent, landlords have been trying to claim the losses they made through their landlord insurances. Therefore, many insurers made changes to what they are willing to cover with this new risk in mind. Most new policies won’t cover tenant-related financial loss until further notice.
When signing a new landlord insurance policy, it makes sense to check what it still covers – and what it doesn’t. In many cases, loss of income due to arrears or vacancies are excluded, together with any legal costs that may come from chasing a tenant for rental payments. However, some policies will cover malicious damage done by tenants. This is why it’s never been more important to put in the hard yards and do your research.
How to get landlord insurance
With so much choice, it can be daunting when it comes time to look for the right insurer. Yet, a little digging now can save you so much in the long-term. Finding an insurer that meets all your requirements and fits the needs of your property can not only put your mind at ease, but prevent you from forking out more money than you need to. Of course, every situation is different.
Here are some questions you may wish to ask yourself as you search for the best cover:
- What type of cover do you need?
- How much cover can you afford?
- What extra benefits are different providers offering?
- What exclusions are they offering?
- Are pets (and their associated damage) covered?
So, regardless of whether you’re looking for landlord insurance in QLD, landlord insurance in VIC, landlord insurance in WA, or landlord insurance in SA, make sure to compare policies before settling on a provider. Even if you’re not one for research, you have options. There will no doubt be advisors available in each state capable of advising you on what’s best for your property and its environment.
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Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.