Why landlord insurance is an expense you won’t regret

According to Finder, landlord and building insurance costs an average of $208 per month for a property worth $1 million. This amount can increase or decrease depending on the value of the property. Once it’s tallied up for the year, your insurance can be one of your larger ongoing expenses (if you haven’t had to make major repairs and if you don’t have interest to pay on a loan of course). So, is it worth having landlord insurance if it can seem like such a big cost?

The answer is yes!

Take a moment to think about the value of the asset you’re insuring and the hard work that you spent to be able to afford an investment. Then, take another moment to think about the potential scenarios where something can go wrong and how much it would actually cost to fix those problems. Do you have any idea on how much it costs to remove building rubble and re-build if there was a fire? Even a small kitchen fire can cost upwards of $35k! All of a sudden, landlord and building insurance might start to look like a good idea… .

In this article, we outline some scenarios insurance may cover (just in case you’re still thinking it over).

When your tenant has a change in circumstances

Simply put, if your tenant’s circumstances change, they may be unable to pay their rent (you may have experienced this when the COVID-19 pandemic hit). Or, something may happen (like injury or illness for example) and they may not look after the property as well as they always have. Depending on your policy, you can get cover for loss of rent, property damage (accidental or deliberate), content’s cover for belongings provided by the landlord and the cost of taking any necessary legal action against the tenant.

Accidents and natural disasters

In the event of an unexpected natural disaster or a significant accident that extensively damages the property (again, think simple kitchen fire), landlord’s insurance provides a safety net to ensure the necessary repairs can happen and mortgage payments continue. This may cover events such as major water leaks and broken pipes, fires, floods and hurricanes (make sure you check your policy carefully though as even floods can have different classifications so you need to be informed.)

Damage caused by pets

Given the change in legislation allowing tenants to keep pets in Victorian properties (unless the owner applies to VCAT and is granted an exemption), more tenants are choosing to have a pet today. And while many are cute, pets can cause damage to floors and gardens. Some insurance policies have responded to this trend and now pay out larger benefits for damage caused by pets. Make sure your policy provides the level of cover you need if your tenant has or decides to get a pet.

Do your research and speak to an expert

Now, property managers are experts in property management, but we are not qualified to give insurance advice. Ask your PM to put you on to some companies they have experience with so you can talk to them direct, or, a quality insurance broker. Work out the landlord’s insurance you need. You’ll need to check your policy covers all of the potential scenarios you’d like to insure against, the process and ease of making a claim if needed (something property managers can certainly comment on) and the level of support provided after you need to make a claim. These factors may also influence your premiums, so it’s important you pick a provider that will give you the level of service and support you need in the event you need to make a claim

Hopefully you’ve found this information helpful and that you’re going to take some time to make sure you’re adequately covered. Act now because we don’t want to be saying ‘hindsight is a wonderful thing’ when something goes wrong and you find out you’re not covered!

Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.