Not every Australian is comfortable with investing in shares and managed funds. They like the idea and the reality of owning property which they rent out to tenants. They get the rental income and they can calculate the capital gain from owning the property.
However, when you rent a property your legal and financial status changes: you become a landlord, governed by state laws, and you become a businessperson, subject to the laws of contract. Because of this new status – and because you are owning and renting a large asset – I advise you to find a broker to source a landlord’s insurance policy.
Every policy has different features, however, there are some basic coverages. Firstly, it covers you for the residential building itself, replacing the building in the event of a total loss or partial loss from all perils including fire and explosion, malicious damage, storm, rainwater and in some cases, flood. It also should cover a landlord’s fixtures and fittings. This replaces the landlord’s damaged contents, including carpets, light fittings etc.
A good policy should cover all perils I mentioned above, but it’s in the definitions of the damage threat that – unless you know what you’re doing – you’ll need a broker to source the best policy.
When you’re a landlord you must be covered for loss of rent. You need a policy that will pay for loss of rent if the premises become untenable. Likewise, you’ll need coverage for tenants’ rent default and theft. The policy will respond if a tenant defaults on the terms of the lease by way of not paying rent or being legally evicted from the property and a range of other contingencies. This type of insurance should include cover for malicious damage by tenants either after a tenant vacates or upon the landlord discovering damage caused by the tenant.
You’ll notice that these insurances cover you and your asset as if they are a business, which is a good way to start looking at your investment property. It’s in these coverages that you’ll need a broker which will ensure that the wordings and therefore the coverages are sufficient to give you the cover you’re paying for. Finally, a good landlord’s insurance policy insures you for legal liability which covers the property owner for any bodily injury or damage to property caused by the owner’s negligence in relation to his ownership of the property.
It’s one of those insurances you’d never think of yourself, but it’s important because if something is wrong with the property and it causes injury to a tenant, the tenant can sue the landlord. So, be insured and see a broker.