Landlord Insurance
Congratulations! You have entered the housing market.
Currently, the Australian housing market provides more returns than any other investment.
Unfortunately (according to some experts), the El-Dorado may saturate in 5 years or so but you can still make a lot of money by that time.
Most property investors need tenants. Once you have tenants you automatically become a landlord.
As the landlord, you need to manage the property.
Tenants pay you rent but you must ensure, that the building you own is safe for them to live in.
Is it possible to ensure the absolute safety? The answer is "no".
For this reason you also need the landlord insurance.
The landlord insurance covers the property for any liabilities and damages.
The insurance of the content, on the other hand, is the responsibility of the tenant (unless you leave your own furniture inside).
Why Do I Really Need Landlord Insurance?
You are not obliged by the law to have the landlord insurance.
Nevertheless, there are many factors which can turn your dream investment into a nightmare.
In the previous paragraph we only talked about safety.
However, the property can become suddenly inhospitable due to natural disasters, excessive temperatures, industrial undertakings etc.
You - as the landlord - are responsible for tenants re-allocations.
Here, you may be forced to pay the rental difference for the tenants, fix the problems with the house or resolve the issues with council.
This may involve expensive court cases, hiring construction companies and... still paying the outstanding mortgage.
Thus, not only safety but any other unforeseen problems necessitate the landlord insurance.
What should Be Included in Landlord Insurance?
Obviously, landlord insurances vary between insurers and polices. But, there are essentials which should guide your policy choice. The landlord insurance should:
- Provide a comprehensive liability coverage
- Provide medical payments (for injuries caused by the accidents on the property)
- Cover the main building for physical damages
- Cover the supporting buildings for physical damages
- Cover the expensive equipment for theft and the damage
There are also polices which include the landlord's loss of rent.
Landlord Insurance Providers
Most major insurance and banking companies provide the landlord insurance. Some banks compete very well even with well established insurers in this domain. The comprehensive landlord insurance for the double storey house costs around $1200 a year. This is based on the estimate that the average double storey house costs +/-300K to build. The landlord insurance seldom offers actual cash value. Most estimates are based on the agreed amount value because properties seldom depreciate with time.