Landlords Insurance, do you need it? Renting out a Property?
Landlords Insurance – Making the call to rent out your property is no small decision. There are maintenance responsibilities to consider but, also, a variety of risks inherent to the job. You’re hosting other people in your property, after all, and there’s no accounting for everyone. This is why landlords insurance is so important.
In terms of coverage, a basic homeowner policy is great if you’re just a homeowner. Liability coverage and the like are all fair and well, but once you start renting out your property, your responsibilities change. And there’s less room for coverage when something unexpected happens.
What do you do if your tenant files a lawsuit against you while living in your suburban studio apartment? Who’s liable if someone hurts themselves on something you were supposed to have repaired in their home? And are you responsible if someone in your building hurts someone else in some way?
Nobody can see the future when it comes to their landlord duties. Join us, today, for a closer look at investment property coverage, and how you can maintain your coverage.
What Is Landlords Insurance?
Landlord insurance policies protect landlords from risks associated with renting their property. This differs from homeowners insurance in that it makes provisions for the risks associated with renting out your property. So, even though a landlord could (and often will) invest in their own homeowners coverage, a landlord policy is highly recommended as well.
Included in a landlord insurance policy are building and content insurance, as you might expect. In addition to this, these policies also usually include various owner-specific properties, including:
- landlord liability insurance
- loss of rent insurance
- rent default insurance
- theft by tenant
- Malicious damage by tenant
It can be easy to think of tenants as the ones running major risks in a rental arrangement. They burn down the house, it’s up to their insurance to pay out for it, right? As it turns out, not at all. In many cases, landlords may in fact be the only person liable for these damages. It’s at these times that you’ll want your insurance locked down and ready to pay out.
Let’s take a closer look at why that is, shall we?
Can you claim under your?
If you rent out your property or you’re no longer the full-time resident, you’re already at risk of your claim not paying out if you try claiming under your homeowners policy. More often than not, homeowners insurance claims are actually denied if the property in question is being rented out. Yours may depend on your provider, but it could leave you in a financial predicament if something unexpected happens.
Landlords insurance adds another layer of protection. These policies cover property owners in ways that protect them from the inherent risks that come with renting.
Make sure to check with your specific provider and find out about any exclusions they may have in your situation. If you aren’t already with a provider, a simple search for “landlords insurance Joondalup” (for example) should yield the results you’re looking for. Even easier, just call Grace Insurance broker in Joondalup, Perth or our Grace Insurance Sydney.
The moment you rent out your property, the fundamentals of the risk changes. You need to make sure you are correctly insured and covered.
More Liability Coverage Is Better Liability Coverage
In cases where you have a rental property and there is an accident where your tenant is seriously injured, at your rental home, they could sue for damages. Your personal liability coverage is unlikely to cover physical damages to your tenants.
Once again, homeowners insurance providers don’t necessarily sign on for these risks, and could very well deny your claim. It’s up to you to take active steps to account for this beforehand. Search “landlords insurance Perth” for packages in your area (or wherever you may be based), and make sure you’re covered. Important to note, your policy have been designed to cover YOUR exposure, not your tenants. Your tenants should still
Landlords insurance for when you need it
Liability claims can cost a lot of money, and it’s hard to predict exactly how much. For the most part, landlords policies tend to limit their personal liability coverage to $10 000 000 , $20 0000 000 and some as high as $30 000 000. This coverage is critical when it comes to cases of negligence, which are also very common.
How much are we talking about, here? On average, landlords tend to need well over $1 million in liability coverage over the course of their ownership, give or take. Liability cover is critical to any landlord. The overall increase in protection, however, is well worth it.
This new increase in coverage is what landlords everywhere use to cover themselves against various lawsuits and legal actions. Depending on where you live, even within the same country, your coverage costs tend to vary from place to place. Searching for “landlords insurance Sydney” could produce wildly different numbers to Perth, for example.
Landlords Insurance Legal Coverage
Nobody ever plans for a court case, but liability can become an issue quicker than you might expect. If you become involved in a legal dispute with one of your tenants, whether you’re prosecuting or they are, you need adequate coverage. Homeowners insurance might not cover these costs, with coverage often limited to the tenants.
Keep in mind, legal representation costs can and often do run upward $50,000 or more. A landlord policy helps with legal defenses to an extent, including “duty to defend clauses” in rental property management.
This also extends to lawsuits as a result of government regulation discrepancies. Standard homeowner insurance doesn’t cover housing discrimination claims, for instance.
Landlord insurance policies that take these disputes into account. Because, the truth is,these claims do happen and you need to be prepared. Even the perfect landlord can discriminate without necessarily meaning to. Landlord insurance policies are designed with this in mind.
Protection Against Damages Caused By Tenants
We are not talking about minor damages to your property such as chipped paint, broken fixtures, and the like. Mostly this may be classed as wear and tare. But this damage is minor compared to what a dog could do to a small child, inside your rental, if left unchecked. Or a candle left burning while your tenants are out for the day.
Once you’ve had an accident, it’s too late to put the genie back in the bottle. Now things have happened, and damage has been caused, and someone is going to be held liable. And that won’t always be the tenant.
Dog bite claims, for example, run close to $50,000 in many cases. If it is the tenants dog, he his ultimately responsible for any injury or damage. You as a landlord, still need to protect yourself in case a lawyer tries to pin the claim on you as the owner. As example, the fence was damage by storm and the tenant did advise that there was storm damage. you took 2 weeks to have it fixed. In this period of time the dog managed to get out and bite somebody. Who do you think will be held liable?
Landlord malicious damage insurance prevents you as a owner taking a massive financial hit in event where the tenant did the wrong thing and purposely damaged your property.
You’ll Recover Lost Income If Your Property Is Uninhabitable
A big problem for many homeowners aka landlords face is that their property can be briefly uninhabitable. This could be as example due to a fire, water damage or even death. If your property have to be vacated due to the repairs taking place, the income lost in this period can be covered by your policy if you pr- selected the coverage.
Rent Default is where the tenant stops paying rent. This is understandably high on the list of landlords’ concerns. In the majority of cases, payment default happens when the tenant’s income is stopped or reduced due to an unforeseen event such as losing their job, sudden expenses, divorce, or illness. Landlord insurance policies often include rent default. Your tenant loses their job, and can no longer afford to pay their rent. They still stay in your property till they get evicted. There would be then a claim under rent default.
Landlords insurance: Protect Yourself
Landlord policies are a lifesaver when it comes to covering the financial risks of renting out your property. This sort of investment property insurance helps to cover you in various worst case scenarios, including:
- tenants who fail to pay the rent
- tenants who damage your property
- unpredictable disasters
- water damage
You’ll want to follow up on a few different things when choosing a policy. Ask your landlords insurance broker about their terms and conditions. Find out what exactly the policy covers, as well as what it doesn’t. Lastly, like with any other policy, make sure you have a good understanding of what excess will apply, if and when you make your claim.
Policies will vary from provider to provider. As with any major investment, it’s a good idea to compare your options. Shop around a little bit. Find out what’s on offer and where your options are.
Looking for more great insurance content from various fields? Check out some of our other great blog posts! And, for some of the best landlords insurance Australia has to offer, make sure to visit us, today!
Located in Perth and Sydney, and servicing all of Australia, Grace Insurance is the region’s premier insurance resource, delivering top-notch solutions to help cover all aspects of your home and business or faith organisation. Contact us today to learn more about our faith insurance coverage and let’s connect!
Grace Insurance does not accept any liability arising out of any reliance on the information in this article. We urge you to consult your insurance broker for personal advise, as we only provided general advise.