Why You Need Landlord Insurance
Owning an investment property should be a rewarding experience, but tenant trouble or plain bad luck can turn it into a drama. Imagine losing everything you have worked so hard to achieve, simply because a tenant did the wrong thing by you.
But there’s an easy solution. If you own an investment property, it’s crucial to have landlord insurance in place if you plan to rent out your property.
Landlord insurance generally covers events that cause loss of rental income which is usually damage or theft. Even with the perfect tenants in place, unforeseen events like storms, floods or burglary can damage homes and destroy contents. The importance of having the right insurance in place to protect your investment should be your number one priority.
Work with your property manager
Property managers will be able to present policies that are affordable, comprehensive and create certainty for your review.
There are a number of insurance companies in the market that specialise predominantly in landlord insurance or renters insurance. These companies work closely alongside property management companies to ensure that clients are being looked after – especially when it comes to their investment.
Your property manager should be asking you if you have insurance or if you would like to take it out, if they don’t, you should be asking them the question.
All property managers are equipped with the contact details to set up these policies on your behalf – it’s a very easy process. Not only that, if your property manager sets up the policy for you, they will be able to lodge insurance claims on your behalf if required.
Get the best policy with specialised insurers
After being in property management for over 12 years, I am still asked on a daily basis, why an owner needs landlord insurance?
With companies like Terri Scheer, EBM Insurance & PIP Insurance all specialising in landlord’s protection and with all of their policies being offered for under $350.00 per annum (which is also tax-deductible) it’s a very low price to pay on a yearly basis for being fully protected – it shouldn’t be a thought about option.
I get to see a lot of policies when I speak with new clients who haven’t previously had landlord insurance. One of the most important things you can do is to separate your policy from your building insurance. At the same time, you should also consider avoiding some of the larger insurance companies. You will find that you are not covered for a lot of items yet end up paying a much larger yearly premium. As always, it is vital that you read the fine print before signing off.
More often than not, companies that specialise in landlord insurance will offer far more benefits than the larger companies and at a more competitive rate.
It’s important to remember that property managers are not insurance brokers and we are not legally allowed to instruct you on which policy to go with. However, we can provide you with flyers and general information on the policies that are being offered for you to make a more informed decision.
An example where a landlord could have lost $24,000
A city apartment in an iconic development is the last place you would expect a drug lab to be set up. For months this lab had been causing an odd smell on one of the floors, while also affecting neighbouring residents. No one knew what was going on behind closed doors.
After suspicious behaviour was identified, the police were called who raided the apartment in question. It was discovered that a meth lab was in operation.
There are specific laws in place in relation to methamphetamine. If the meth has reached certain levels (tested by a specific commercial cleaner and drug testing specialist) in the paint, kitchen cupboards, and carpets - you will be legally required to remove all items and rebuild the apartment from scratch.
In this instance, the levels had reached a number where the owner was ordered to repaint, install new blinds and have the apartment commercially cleaned.
The final cost taking into account loss of rent, agency fees, cleaning, painting, rubbish removal was over $25,000. That’s effectively an entire year of rental income gone!
The owner had a landlord insurance policy in place which left him out of pocket around $1,000 saving them $24,000. If the owner didn’t have this policy in place, they would have had to pay for the apartment to be bought up to a standard with no rent coming in at their cost, which could have even forced them to sell.
For under $350.00 per annum, there is no doubt that it’s the most important decision you can make as an investor, as fickle as this world is, you just never know what could happen.