6 reasons to take out landlord insurance

Making the leap from homeowner to property investor comes with a unique set of challenges and opportunities.

While many landlords try to minimise their outlay and maximise their return – and understandably so – insurance is the one essential expense you simply can’t afford to scrimp on.

It’s so important that you are adequately covered with suitable landlord insurance so that the following scenarios don’t cripple you financially…

Scenario: Your property becomes uninhabitable

When you purchased your investment property, you probably looked at vacancy rates and days on market trends for the suburb and made sure you had backup funds in the event that the property sat empty for a month or two.

But what if the home became inhabitable, due to damage outside your control, such as a fire or flood?

Sure, your building insurance will kick in to cover the repairs, but what about the rental income you’ve lost in the meantime?

Coverage for loss of rent also applies if a tenant runs the gauntlet without notice, owing to your rent.

The amount you’ll receive will be tied to current market rental rates, so be careful not to over or under-insured.

Scenario: Your tenant gets nasty

We’re not talking about normal wear and tear here, but rather malicious damage caused by the tenant, which affects your ability to let the property or costs a bomb to fix.

You can always pursue them through the relevant legal channels, but it won’t always be successful and could cost more than it’s worth…

During this time, your property has sat empty because you can’t afford to fix it.

Scenario: Your walls are insured… but the contents are not

Just as you take out home and contents insurance on the property you live in, you need to ensure your investment properties have insured any contents within it.

Now, you might be thinking, “They’re the tenants’ contents – and therefore the tenants’ problem.”

This is true to a degree – but what about the curtains and blinds, and the carpets?

There are plenty of fixtures and fittings that you own as the landlord, so it’s essential to have proper coverage.

Scenario: Your tenant is as dodgy as they come

Sometimes, tenants don’t pay their rent.

And sometimes, they skip town, owing to you thousands of dollars in back rent.

Sometimes, they leave and take your $600 dishwasher and brand-new Venetian blinds with them!

While proper vetting and interviewing of tenants will help to minimise this risk, you can never be too sure.

Being covered in the event your tenant turns out to be a bad apple is priceless, as you’ll already be paying the emotional price for their dishonesty — you don’t need to suffer financially as well.

Scenario: You have to go to court

If you end up in the unfortunate position of needing to take a tenant to the tribunal, you may need legal counsel.

As anyone who’s ever hired a lawyer will know, it doesn’t come cheap — it’s often hundreds, sometimes thousands of dollars per day, depending on their area of expertise.

Cover yourself with legal fees, so you don’t need to pay the whole bill out of your own pocket.

Scenario: Someone is seriously injured

Perhaps the most important, yet often overlooked, type of insurance for any landlord is public liability insurance.

Should one of your tenants or their guest incur a serious injury at the property, the damages awarded to them could be in the hundreds of thousands.

Public liability insurance is a must, especially when you consider that for just a few dollars each month, you could be covered for up to $10 million in the event of a nasty accident.

About Leanne Jopson Leanne is National Director of Property Management at Metropole and a Property Professional in every sense of the word. With 20 years' experience in real estate, Leanne brings a wealth of knowledge and experience to maximise returns and minimise stress for their clients.