The Importance of Landlord Protection Insurance

By Peter Sarmas on 5 Jun 2013
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While the majority of tenants take good care of rental properties, there are always exceptions to the rule. This is why landlords need to have the right insurance cover should they find themselves in a situation of dispute.

A survey of 500 landlords by market research consultants, BDRC Jones Donald in late 2012 found that only 54 per cent of self-managed landlords had their property insured – leaving 42 per cent of self-managed landlords vulnerable to a potential loss of rent and reparations on damaged property. On the flipside, 81 per cent of professionally managed properties were covered by some form of insurance, such as building cover, malicious or accidental-damage insurance, or rental-income protection.

The truth is many landlords don’t realise that their standard home and contents insurance policies don’t usually protect against malicious or intentional damage by tenants or the failure to pay rent. This is where landlord insurance comes in handy.

A landlord insurance policy covers the following:

• Malicious or intentional damage to the property by a tenant or their guests
• Theft by the tenant or their guests
• Loss of rental income if the tenant defaults on their payments
• Liability, including any claims against you by the tenant, and
• Costs involved in taking legal action against a renter.

Landlord insurance specialist Terri Scheer Insurance reported that forty-five per cent of the insurance claims it processed in 2012 were for a loss on rental income – usually as a result of tenants defaulting or absconding. When shopping around for landlord insurance, the best policies on the market allow for 15 weeks’ loss of rent and cover any legal expenses relating to personal injuries to tenants or malicious damage done to an investment property. In addition, some policies will also cover contents that could be damaged or stolen – this is particularly important if your investment is partly or fully furnished.

Prices for landlord insurance premiums vary according to the location and type of investment property you own. As a guide, you can expect to pay around $500 annually for a unit and closer to $1,000 for a house. The upshot to this cost is that landlord insurance is tax deductable, making it a worthwhile investment for those wanting peace of mind on their investment.

About the Author

Peter Sarmas is a Certified Property Investment Advisor (PIAA) and Vendor/Buyer Advocate. Before becoming the founder of Street News, Peter completed a Degree in Applied Science (Chemistry) and a Graduate Diploma in Property Valuations (Hons). Peter believes property investing is a major and potentially risky undertaking. In his view, everyone should have an independent person acting on their behalf when seeking property investment advice.

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