Do I Need Landlord Insurance?

One very common question I am asked by my clients is do I need landlord

insurance?

I always recommend that my clients take out a landlord insurance policy. Most people assume that landlord insurance will just cover for if a tenant damages a property. It will cover for this; however most policies will cover for so much more, particularly providing financial protection more than anything. For example, if you had a fire at your property and it was deemed unliveable, we could not charge the tenants rent in this instance. Landlord insurance may then engage and ensure that you are not out of pocket for rent.

Another example, if you had a sole tenant pass away, we could not charge any further rent. So landlord insurance may then engage and ensure your are not out of pocket for lost rental income. If for example the tenant has passed away in the home itself, you may also require a forensic clean be attended to, which can cost anywhere between $10,000 – $15,000, this may also be covered within your policy.

I do understand that these are things we do not wish to speak about, however it is always best to be prepared.

At a minimum, most agencies will require you to have the building insured and

also possess a minimum of $10,000,000 in legal liability insurance and your

agent may require a copy of this insurance certificate for their file. It is also a

good idea to consider having some level of contents insurance listed within

your policy to cover for things such as carpets and windows furnishings.

Most landlord insurance policies will also offer cover for non-payment of rent,

along with loss of rent due to abandonment. During my 12 year career in

property management, I have seen numerous occasions where my clients have

made substantial claims against their insurer with the largest claim being

excess of $30,000. Failure to have adequate cover can result in out of pocket

expenses and can certainly cause unnecessary stress to investors and their

families. In my opinion, Landlord insurance is something you can’t afford not to

have.

I also cannot express the importance of having a good property manager

during this period. In the event your property manager has failed to keep the

tenants on a fixed term lease, or has failed to keep adequate records, you

could potentially be voiding your landlord insurance policy.

I would also highly recommend reading your Product Disclosure Statement

thoroughly prior to initiating a policy, to ensure the cover is suitable to your

needs. Please also be mindful that your property manager cannot give

professional advice on insurance.

Grace Hilder

Director of Property Management