Buildings, contents and liability – what else do I need in my landlord insurance cover?

Insuring your investment is a must – and it pays to get the right cover.

Some companies offer a combination of both home and landlord cover, however although an investment property and your home are both buildings with people living in them, it’s about at that point the similarities end.

Remember, your investment property is a business and it should be treated as such; situations do arise which do not happen in your residential home. For instance, your investment property will need to be covered for:

  • Theft or burglary by tenants or their guests
  • Malicious damage or vandalism by tenants or their guests
  • Loss of rent due to tenant default
  • Legal expenses required to evict a tenant

We recommend you use your regular home insurer for the house you’re living in, and then take out a quality landlord insurance with a specialist company for your investment property.

When you’re choosing an insurance company, it always pays to read the small print when you’re comparing policies so you know exactly what you’re covered for, and what you’re not.

Here are some commonly overlooked points:

Proving your case

One difference we see between specific landlord insurance companies and land insurance from other companies, is general insurance companies will not cover damage to a property unless you can prove it was “malicious”.

How do you prove that?

Timeframe of the rent default payment

Many policies will only start paying out on loss of rent after four weeks, or will charge an excess to start paying earlier. However, some policies will only pay out after 12 weeks’ loss of rent or offer you a fixed lump sum only.

You have to remember a property may not always be empty because a tenant can’t be found; it may be empty for a long period of time due to extensive damage after a storm or water damage.

What is classed as ‘contents’

Even if you’re not providing a furnished property, you may need to take out some contents insurance to cover items such as carpets and curtains. These items may not be covered in the buildings insurance.

Body corporate properties

If you own an apartment or a strata titled property, the building will be covered by its insurance, but you may need to check if damage by tenants is covered. If you don’t think the buildings insurance is adequate, you can purchase specialist insurance, to cover you in the event the body corporate is underinsured or won’t insure any tenant related issues.

Type of lease

Some companies will not cover you unless your tenant is on a current fixed term lease. Many tenants wish to remain in the properties after their fixed term and continue with an ongoing lease. While this is totally legal, some insurance companies may use this as a reason “not” to cover you.

If you have a good tenant who does not wish to sign a new fixed-term lease, the alternative is to give them notice to leave, have a vacancy, pay marketing and leasing expenses and then get a new tenant and hope they are good and will look after your property.

Probably better to pay a little more for a quality landlords insurance than run the risk of losing good tenants (we have tenants who have been in this situation for over 25 years in properties), or finding yourself in a situation where you’re not covered at all.

Landlords insurance is often a tax-deductible expense anyway, so it’s a win win situation!

While we cannot recommend an insurance company, we can advise on which companies we see landlords get the best result with when they do have issues.

If you want to know more, come on in to our Cardiff office for a chat or give us a call on 02 4956 9777.

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