Insuring your investment property: How Landlord Insurance protects you
By Chris Dougherty, General Manager, Westlawn Insurance 19 September 2017
It’s no secret Australians love investing in residential property. According to property data and analytics company, CoreLogic, there are 2.6 million investor-owned dwellings across the country worth approximately $1.37 trillion. In percentage terms, 27% of all Australian dwellings are owned by investors, representing 24% by value.
Most investment properties are located in the capital cities and regions where tourism and resources are the main industries. Of the top 20 regions across Australia for proportion of investor-owned dwellings (including capital cities), the Gold Coast ranks second, the Sunshine Coast comes in it at number 12, while the NSW Mid North Coast rounds out the top 20, according to CoreLogic data.
Protecting your property investment
With an average of 1.28 investment properties per investor, the vast majority of property investors own just one investment property. And thanks to record low interest rates over recent years, the number of first time property owners has increased substantially in recent times.
While the focus for many of these first time property investors may be on choosing where to invest, what type of property to purchase, and finding the right mortgage, insurance may not always be as high on the list of priorities.
But it should be.
Choosing the right insurance is vital for protecting your investment. Landlord insurance covering buildings, any included contents, and loss of rent should play a vital role in any property investment strategy.
As landlord insurance policies will differ on what is covered, optional extras and policy wordings, you should consult your Westlawn Insurance Broker on the right coverage for your needs.
Building cover protects against damage to the property’s structure and includes damage caused by tenants, their family or their invited guests. Building cover includes the property itself along with items attached to the property, such as:
Domestic outbuildings such as garages and sheds
Infrastructure for services
Swimming pools and spas (built-in).
Building insurance can cover:
Accidental loss or damage
Deliberate or malicious damage (including by the tenant)
Theft or damage due to theft (including by the tenant), and
Damage caused by tenants’ pets.
If your building is already insured by an owner’s corporation or strata, you may only need to insure the included contents of your investment property and not the building itself.
Generally, contents cover applies to unfixed household goods and furnishings that you own, or are legally responsible for, at the property that are for your tenant’s domestic or residential use.
These items can include:
Carpets, rugs, internal blinds and curtains
Manchester and linen
Furniture and fittings
Whitegoods such as washing machines, dryers and fridges
Paintings, pictures, artworks and antiques
TVs, stereos, DVD players and non-portable entertainment systems
Portable heaters and vacuum cleaners
Cutlery, crockery and kitchenware
Household tools and gardening equipment, and
You will generally be covered for loss or damage caused by a tenant or by someone who is at the property with the consent of the tenant. You won’t be covered if the damage is caused by you or someone acting on your behalf.
Loss of rent
What would happen to your investment if the weekly rent suddenly stopped coming in?
While your rental income could cease at any time, your monthly mortgage repayments will still fall due. Landlord insurance can provide peace of mind by covering the loss of rent on your investment property in certain circumstances.
Loss of rent due to an insured event
If you make a claim through your building cover for loss or damage to your property due to an insured event and it cannot be lived in, you may be covered for the weekly rental amount for the time it takes to repair or rebuild the property so it can be lived in again.
If you have this option with your policy, you may be covered for loss of rent due to:
Default of rent payments by tenant – If your tenant defaults on rent payments and fails to pay after you’ve issued the appropriate notices, you may be covered for loss of rent for the lesser of; a specified period; or until you get another tenant; or until rent payments re-commence.
Tenant departs without notice – If your tenant permanently departs from the property without providing any written or verbal notice, as required under the rental agreement, you may be covered for loss of rent for the lesser of; a specified period; or until you get another tenant; or until rent payments re-commence.
Death of a sole tenant – If your property is rented to a sole tenant and they die before the end of their tenancy, you may be covered for loss of rent from the date of death for either a specified period or until you get another tenant for your property.
Tenant hardship – If your rental agreement is legally terminated by a Residential Tenancies Tribunal or other relevant authority due to a tenant’s hardship, you may be covered for loss of rent from the date the termination order takes effect for the lesser of either a specified period, or until you get another tenant; or until rent payments re-commence.
Prevention of access
You may also be covered for loss of rent if your tenant cannot access your property. For example, where:
There is damage to a building, the strata title property in which the unit is located, or a road or street providing access to the property
A burst water main prevents access
There is a bomb threat, or
Emergency services prevent access to your property or evacuate the tenant for safety reasons.
Your cover will stop after a specified period or when the property becomes accessible by the tenant.
Your landlord insurance policy may also cover legal expenses in certain situations, such as for making a claim for rent default or for theft by a tenant.
Consult a Westlawn Insurance Broker
Remember, landlord insurance policies will differ from one insurer to the next. This can include what is covered, optional extras, exclusions and policy wordings. Your Westlawn Insurance Broker can assist with determining the right level of cover to suit your investment property and your individual needs.