Taking out an adequate landlord insurance policy is one of the most important things for any property investor. You might get lucky and never need to use your policy, but there is no way to know this before the fact.
BMT Insurance brokers specialise in finding policies designed for landlords just like you. Here are some of the most common questions they get asked regarding landlord insurance policies.
1. What is landlord insurance?
Landlord insurance covers property investors for the risks associated with owning a rental property.
This includes the environmental factors that could damage the property, like natural disasters. ‘People-related’ risks are also covered, such as tenant damage.
2. When do you need landlord insurance?
You need landlord insurance as soon as the property you own becomes an investment. This includes the period where you are on the hunt for tenants as the property is ‘genuinely available for rent’.
3. What is included in landlord insurance policy?
Each policy varies, but common items covered include:
- Natural disasters
- Damage from impact (e.g. fallen trees)
- Legal liability
- Loss of rental income
- Rent default
- Tenant damage
- Legal expenses of taking tenants to court.
4. Is landlord insurance a legal requirement of renting a property?
It’s not a legal requirement but is highly recommended.
Just like any optional insurance coverage, landlord insurance covers you for factors that are out of your control. Without it you can be faced with a hefty expense that could result in a failed investment.
5. How is landlord insurance different from regular homeowner insurance?
Landlord insurance and homeowner insurance are both designed to protect your property, but each are designed with different risks in mind. Homeowner insurance is designed for you and your items in your home- it doesn’t include cover for any landlord related risks such as tenant damage.
On the other hand, landlord insurance is specifically designed for the risks associated with renting out your property, such as loss of rental income.
6. What is sum insured?
By definition, sum insured is the maximum amount you can claim for any one insured event. This basically means your sum insured should be enough to cover you if the property had to be knocked down, cleared away, and rebuilt to the same standard.
It’s essential to ensure your sum insured is fit-for-purpose. This means regular reviews of your policy to avoid being underinsured, which can result in you being out-of-pocket in the instance of an insured event occurring.
7. Does landlord insurance cover pet damage?
It depends on the insurance policy – each one is different. However, it’s recommended to go with a policy that covers pet damage if you’re going to accept pets.
Some policies may specify that a pet must be on the lease for related damage to be insured. This means communication is key with he tenant so there is no misunderstandings on whether a pet is allowed at the property.
8. How expensive is landlord insurance?
There’s no one-size-fits all approach when it comes to determining the premium of a landlord insurance policy. Just some factors that an insurance company will look at when determining your premium include:
- Property type and location
- The contents you own within the property
- Additional inclusions
- Your claim history
- Property value and it’s replacement cost
- The structure and security of the property
- Nature of the investment, for example if it’s a short-term or long-term rental.
9. Does landlord insurance cover me if my tenants stop paying rent?
Some landlord insurance policies include ‘loss of rent’ or ‘rent default’ cover.
Loss of rent covers the situation where the tenant stops paying rent due to the property becoming partially or totally uninhabitable. For example, if the property experienced flood damage or was destroyed by fire.
Rent default cover you for the situation where a tenant stops paying rent on their own accord. This could be for a number of reasons such as employment changes, illness or your tenant breaking their lease early and not paying the missed or remaining rental repayments.
10. How can I make sure that I have the right level of landlord insurance?
Speaking to an insurance broker is a helpful way to ensure you have the adequate level of insurance. They will liaise directly with the insurers for you to discuss policy options and come back to you with what’s available.
BMT Insurance brokers hold an added advantage. They have access to BMT Tax Depreciation’s comprehensive construction cost data. This means they can also assist you in estimating your sum insured.
To learn more about BMT Insurance and how they can help you with your landlord insurance needs, contact the team on 1300 268 467 or Request a Quote.