While owning an investment property and collecting rent can be an appealing option for many investors, there is a startling trend emerging in the Australian rental market. The 2013 Understand Insurance Research report, commissioned by the Insurance Council of Australia, found that 83 per cent of homeowners are underinsured while one in 25 Australian homeowners had an uninsured property.
These findings should prompt owners of rental investment properties to more carefully consider the fine print of their insurance policies. If you own an investment property a tailored landlord insurance policy is worth considering as it can help protect investors from specific risks not usually covered by standard building and contents insurance policies. For example, things like malicious damage by tenants, unpaid rent, theft of property or loss of rental income are not covered by a standard home and contents insurance policy but are included in a specialised landlord insurance policy.
Understanding what is, and what isn’t included, in your insurance policy is one of the most overlooked aspects of insurance, according to the report. It also notes that more than a quarter of Australians are uncertain whether they’re covered against flooding, lightning strikes, water, storm or fire damage for their properties. According to the Insurance Council of Australia (ICA), the damage bill from declared natural catastrophes is about $255 million this year so far, making it by far the most common claim reason. Without appropriate insurance, many property owners would not be able to afford the necessary repairs to their property, let alone the loss of rent if the property were considered uninhabitable.
Managing financially without rental income should be a major motivator for property owners – how would you cope without rental income if the property were so badly damaged it had to be rebuilt? However, insuring your investment should cover all potential negative outcomes or risks, not just major incidents.
The investment in landlord insurance provides ongoing peace of mind for tenants, landlords and property managers alike, and a good policy will cover for loss of rent, including circumstances when the property cannot be tenanted while damage is repaired.
Tailored cover, such as that provided by Landlord Complete offers the ability to cover for all foreseeable risks and can be amended to provide exactly the level of cover your particular property requires. It also means you know exactly what you are and aren’t covered for.