If you own an investment property, at the very least you’ll need building insurance and a minimum of $10 million legal liability insurance before a tenant can move in. While a standard building insurance policy may cover your tenanted building for damage caused by events such as fire, water and storm damage, you won’t be covered for losses relating to rent default or malicious damage caused by tenants or their visitors.
While not compulsory, it’s wise to consider landlord protection insurance. Landlord insurance can protect you in the event of a default by a tenant causing loss of rent, or malicious damage caused by a tenant or their visitors.
Landlord insurance policies generally offer the following cover options:
- Buildings or contents
- Loss of rent
- Rent default and theft by tenant, and
- Legal liability.
Let’s look at each of these options in greater detail.
Buildings & contents
Whether or not you rent out your property furnished or unfurnished, there are content items you need to consider when insuring your rental property.
Contents insurance covers items owned by the landlord that aren’t part of the structure of the property. These can include:
- Carpets and loose floor coverings
- Curtains and internal blinds
- Furnishings
- Light fittings not permanently fixed to the building.
Loss of rent
If a rented property is damaged and cannot be occupied, the lease agreement will typically have a clause allowing the tenant to cease paying rent.
Loss of rent, therefore, covers you when your property cannot be occupied due to building damage. This can include damage caused by storm, water, fire, explosion, malicious damage or any other event covered by the policy. You’re generally also covered if damage to another nearby property prevents access to your own property.
The policy will pay you for the loss of rent from the date of loss until the property is fit to rent again (up to specified policy limits).
Rent default and theft by tenant
This covers you for loss of rent where a tenant fails to pay their rent in accordance with their rental agreement. The maximum period a policy will pay for loss of rent due to default is usually 15 weeks although this can vary between policies.
Most policies will cover you for loss of rent as a result of:
- Default
- Tenant eviction due to a court order
- Tenant obtaining a hardship order
- Unexpected death of a tenant.
To make a rent default claim, you’ll need to have a current written lease or rental agreement in place.
Legal liability
As mentioned, legal liability for a minimum of $10 million is required for tenanted properties in NSW. Legal liability covers you for the amount you’re liable to pay (including legal costs) following:
- Death or bodily injury to someone else suffered on your property, or
- Loss or damage to someone else’s property caused on your property.
What is not covered by landlord insurance?
As would be expected, landlord insurance won’t cover damage caused by normal wear and tear, poor maintenance or tenant neglect. These are all the responsibility of the landlord and can include such things as:
- Marked, scuffed and dirty walls
- Stained or dirty carpets
- Rubbish left at the property
- Property has not been cleaned
- Baked on grease in oven, food and oil splatter on kitchen walls and ceiling
- Cigarette smoke and stains.
If your property becomes unoccupied for a specified period, some policies may reduce your coverage while others may cease coverage altogether. Contact Westlawn Insurance Brokers if your property becomes unoccupied to ensure you remain covered.
Similarly, not all landlord insurance policies cover short term rentals. Again, contact us to ensure you have the right cover in place.
Making a claim on landlord insurance
If you need to make a claim for damage or theft by a tenant, the insurer will usually request the following information:
- Date and time of loss
- Cause of loss
- Tenant or third party details (if applicable) – name, address and contact number
- Property agent contact details
- Police details (if applicable).
If you need to make a claim for loss of rent or rent default, the insurer will usually request the following information:
- Copy of bond refund application/receipt
- Ingoing and outgoing inspection reports
- If re-let, tenant’s new rental agreement
- Copy of quotes, invoices for all expenses
- Copy of court bond/authority determination
- Copy of notices/leave arrears and letters issued to the tenant
- Photos of any damage, prior to repair
- If the damage involves strata, confirmation of what the strata have covered
- Copy of the rental ledger.
Contact a Westlawn Insurance Broker
To learn more about landlord insurance for your investment property, contact a Westlawn Insurance Broker today.
- Call us on 1300 WESTLAWN (1300 937 852)
- Email us at insurance@westlawn.com.au
22 February 2016
Westlawn Insurance Brokers Pty Ltd ABN 65 075 847 291 AFSL No. 246520
