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Landlord insurance demystified in under 3 minutes

Has COVID-19 made you unsure about managing the risks of owning an investment property? This article will update you on what landlord insurance will and won’t cover in light of COVID-19. And, a forewarning, there are a lot of grey areas.

Landlord insurance is shorthand for building, contents or rental cover, or a mix of these for a property you rent out. The ‘contents’ in the property you rent out are the fixtures such as carpet and floor coverings, light fittings, appliances and window coverings. This doesn’t cover your tenants’ possessions.

The self-management myth debunked

This insurance gives landlords protection for financial loss, accidental damage and legal liability, but we qualify that below. You may also be able to tap into millions of dollars of coverage when it comes to public liability insurance, for example, and up to thousands of dollars for other inclusions. If you self-manage and a catastrophe strikes, you could be significantly out of pocket if you don’t have the right policy. Consider how far your bond will go to recover your losses if a tenant’s at fault.

In 2018, just 30,000 such claims were made, according to the Insurance Council of Australia. Most claims are for storm, flood or water flood damage, rent default and theft.

You’re probably not covered for COVID-19 rent defaults

Generally, property owners who’ve taken out a policy after 28 March 2020 are unlikely to be covered for rent default. Insurers have made this move to stem their losses given the pandemic’s impact. As your broker/adviser, we can update you on any changes to your landlord insurance, such as whether the rent default coverage changed when you renewed your policy.

Check with your state or territory government to see if they offer rent assistance measures. The moratorium on evicting tenants (except for those in social housing) will end on 26 March 2021. This means that most new landlord insurance policies won’t cover you for tenant-related risks that prompt you to end the lease early.

Benefits of landlord insurance

There’s a lot, though, that landlord insurance could cover including:

  • Any type of investment property including a house, unit, townhouse (and the land they’re on) or apartment
  • Events causing you to lose rental income
  • Theft or damage to your property by the tenants or their guests
  • Damage from storms, fire, lightning, floods, water, fallen trees, earthquakes, vandalism, explosions, vehicle collisions
  • Public liability (up to $20M) covering death, injury or damage to the tenant on the property where the landlord is found responsible
  • Possibly the replacement of deadlocks

What won’t be covered

Importantly, landlord insurance is unlikely to cover:

  • The difference between the pre-COVID-19 rent and a discount you might have offered the tenants (insurers don’t see that as a rent default)
  • Loss of rent or rent default post COVID-19
  • General wear and tear
  • Damage by insects or rodents
  • Where you breach the tenancy agreement
  • Where you or someone you instruct damages the property
  • Parts of the property you don’t rent (for example, you might store your belongings in the garage and don’t give tenants access to it).

Insured property value isn’t its market value

As your broker/adviser, we can guide you on tweaking your coverage, depending on the agreed or market value of your property and contents, as well as the excess you’re comfortable paying. Here are some great tools to calculate your assets’ values to make sure you’re not under-insured. We help you navigate through the inclusions and exclusions to find the exact insurance policy for your criteria.

Importantly, we abide by the Insurance Brokers’ Code of Practice, so we work for you as our client, not a particular insurance company. That means we’ll never ‘set and forget’ your insurance and will always keep you updated on fine print changes.

Article supplied by OneAffiniti

Photo by Steven Ungermann on Unsplash