Choosing The Best Insurance for Your Property Investment

July 26, 2022
What are the opportunities and obstacles of insurance?

A lot of people dismiss insurance. Others have a way of perceiving it as costly and involving a lot of discussion and paperwork, but they can miss that insurance is a good investment.

Investing in insurance will take care of matters in a variety of situations, and let’s face it – not having the right insurance for your rental property could prove costly.

Landlords have a duty of care for their properties. If you're a landlord, you must ensure your properties are well-maintained and do not risk injury or damage to your tenants. It is a common misconception that standard home insurance is sufficient for your property. However, this is debunked, as it can prove costly if you need to make a claim and do not have the correct insurance policy in place. Insurance isn't a burden, as most perceive; it's essential if you own an investment property. It will safeguard you and your finances from risks and provide peace of mind.

What is the difference between contents insurance, home insurance and landlord insurance?

Contents insurance vs home insurance

Contents insurance protects your valuables, and it's a good idea to safeguard them against fire, theft and other risks, especially accidents. If something terrible happens to your possessions, replacing them can cost a lot of money, some of which may be irreplaceable or hold sentimental value. 

Meanwhile, home insurance is created to secure occupiers from the financial costs associated with repairs due to damage or loss caused by an insured event. It can also cover the likelihood of a third party being injured or damaging their property while on the premises. It is a common misconception that standard home insurance is sufficient for your property. However, this is debunked, as it can prove costly if you need to make a claim. More often than not, the funds don't usually stretch out to any other financial losses.

Home and contents policies are not designed to cover income-generating properties, as they may be reviewed as a commercial activity, and excluded explicitly from home and contents insurance.

As a Landlord renting out your investment property, you might be surprised that an insurance claim could be rejected. Most landlords with properties in strata complexes often think that they don't need to take out insurance as the complex has a strata insurance cover. However, like home and contents insurance, the strata insurance will not cover tenant-related losses – nor will it make up for the contents of that unit concerned.

Landlord insurance

While home or contents insurance usually covers common risks, tenants are another essential matter to consider, and they carry other risks. Studies have shown that most of the claims made from landlord insurance policies are for losses relating to tenants. And the most usual claim is loss of rent. Whilst you can have a tenant who purposely damages the property, there are also times that damages occur at the property beyond the tenant's control, and despite the tenant's best efforts. As a landlord, you may need to make an insurance claim in situations like these. 

Under the lease agreement, the tenant must maintain the property in the same condition it is given to them in. The lease also states that it is the tenant's responsibility to report any damages or repairs they have caused to the property. Yet, sometimes tenants are not the cause of damages or required repairs. If damage occurs or repairs are necessary, and the tenant isn't to blame, this usually falls onto the landlord to repair and pay for.

Unknown to many, property management agencies can do this for you, as they acknowledge the existence of letting scenarios where the landlord has no idea of the costs of protection for tenant-related losses.  Property management agencies like Rent Choice can get quotes for you from different insurance providers, for the different types of insurance you may need for your home.

How can landlord insurance help me?

Landlord insurance protects against various risks when owning an investment property, such as fires, storms, accidents, and loss of rental income due to repairs. It also includes situations when tenants remove items from the property that are not theirs, complete unapproved renovations, and even replace furniture or appliances without permission. 

What else? Don't forget the legal expenses involved with going to court over problems with uncooperative tenants. Remember that not all personal insurance policies may not cover you when renting out your property.

What steps should I take next?

A property manager can guide you through applying for an insurance policy. They can obtain quotes from insurance providers to ensure you have all the relevant information to select the correct type of insurance for your investment property. Property managers want to ensure that you make the best investment property choices.

If you're stressing about what insurance to get, a property manager will happily obtain quotes and information on insurance policies for you to make a decision on. Start protecting your property investment with us here!