It’s no secret that finding a fit-for-purpose rental property can be a challenging task.
Once you do find the perfect one, the next step is protection. You can have peace of mind with the right insurance required for your rental property.
In this article we will look at:
- Understanding the importance of insurance
- What insurance is required for a rental property?
- Insurance when turning your home into an investment
- What insurance do you require following a renovation?
- How to make sure you have the right level of insurance
Understanding the importance of insurance
Your insurance should always cover you for devastating events such as fire or significant damage caused by tenants.
If you don’t have enough insurance coverage, you’re underinsured. This means you can be thousands, sometimes hundreds of thousands, out of pocket when the worst-case scenario does happen.
On the other end of the scale, it’s also possible to be over-insured. While you’ll certainly be covered, you’ll also be spending too much money on premiums.
What insurance is required for a rental property?
As a property investors, it’s important to know what insurance you need and how much.
This covers you for any tenant-related risks.
While each landlord insurance policy is different, cover commonly includes loss of rental income and loss or damage of your contents and building by the tenant. It’s important to note that your tenant’s contents aren’t covered under your policy.
Building and contents insurance
This covers you for unexpected events and non-tenant related risks that can damage your rental property.
For example, natural disaster damage which is usually covered under building and contents insurance includes damage caused by fire, storm and floods.
Public liability insurance
Often included in your landlord insurance policy, public liability insurance covers legal expenses that you may need to pay when an incident happens on your rental property.
It’s important to understand your policy so that you know you’re covered on all bases. For example, landlord insurance sometimes includes building insurance and public liability insurance.
Insurance when turning your home into an investment
Rental properties and owner-occupied homes have different insurance needs. This is due to rental properties being exposed to different risks such as tenant damage or loss of rent.
Insurance policies are designed to be fit-for-purpose and it’s common to turn a once owner-occupied home to a rental property. When this happens, property owners sometimes believe they can continue to hold their current policy.
In reality, this isn’t how it works and doing so can expose you to many risks, both financially and legally. If you’re thinking about turning your home into an investment, contact an insurance specialist to ensure your policy is updated.
What insurance do you require following a renovation?
Renovating your rental property usually means that you’re improving it and adding value to the property.
It’s always recommended to have your insurance policy reviewed following a renovation. Big or small, a renovation can change the construction cost of your property, and you need this cost completely covered.
How to make sure you have the right level of insurance
The most reliable way to ensure that you have the right level of insurance is to know the construction cost of your property. There are a variety of complexities and variables when determining an accurate building replacement cost. This includes current costs in the local area, cost escalation over time, removal of hazardous materials and land or site constraints.
It’s important to talk to a specialist who can accurately determine the replacement cost to ensure you are adequately insured. BMT Insurance has access to comprehensive construction cost data available to determine this.
To learn more about BMT Insurance and the additional services they offer Request a Quote or call the team on 1300 268 467.