A Property Managers Guide To Landlord Insurance
We take out all kinds of insurances to safeguard ourselves against unforeseen eventualities. For landlords and property owners who want to keep their investments secure, there are a couple of different types of policies, you should consider.
Link up with a licensed professional
However, before you even begin to think about what type of landlord insurance to choose, you need to select a reputable provider. The Corporations Act which is regulated by ASIC (Australian Securities and Investments Commission) and dictates that all companies or individuals who provide financial advice or deliver a financial service must be licensed under the Corporations Act.
How is this different from home insurance?
Property managers are often asked by first-time investors how landlord insurance differs from home insurance. Landlord insurance policies take into consideration the risks you face as a property owner and investor and not necessarily as a resident. Landlord insurance also covers the property owner for tenant-related risks that are not covered by home insurance or body corporate/strata fees.
Provide accurate information
Property managers should be especially aware of their role in helping property owners securing landlord insurance policies. As a property manager, you should always obtain written consent from the landlord or property owner when arranging insurance and paying premiums. It is still best to get your client to fill in application forms whenever possible. Insurers rely on the information provided to determine risk, and the accuracy of the information can have an impact on claims.
It is also wise to consider the location of the investment property when taking out landlord insurance. For example, if the property is in Queensland, it is good to remember that North Queensland is sometimes impacted by cyclones and floods. Properties located in a disaster-prone area are at higher risk of damage and without an effective insurance policy in place, property investors could face significant out of pocket costs.
Inclusions and exclusions:
Typically, a landlord insurance policy will cover:
- Theft or burglary by tenants, their guests or other burglars
- Malicious damage or vandalism by tenants or their guests
- Loss of rent due to tenant default or breaking of the lease
- Legal expenses required to evict a tenant
- Damage caused by disasters (i.e., floods, storms, fires)
Other inclusions to consider are:
- Damage caused by a tenant’s pet
- Public liability cover for injury to someone visiting your investment property
- Rental loss due to an insured event, such as a tenant defaulting on their rental payments the death of a sole tenant or the eviction of a tenant by court order
- Re-letting expenses after a claim on rental loss
- Removal of a tenant’s goods after a claim on rental loss
- Change of locks after a claim on rental loss
- Eviction of your tenant by court order
- Unexpected death of a tenant
- Default (your tenant refusing to pay rent)
Meanwhile, common exclusions include:
- General maintenance expenses or the costs of repairs by the tenant
- Rental income due to not having a tenant
- General wear and tear
- The ‘cheapest’ option
The property owner may ask the property manager to go for “the cheapest option.” As a property manager, it is part of your job to make clients aware of the risks that come with investing in property. Remind the tenant that the decision should be based on value and not on price.