What Every Landlord Should Know About Reviewing Their Insurance
Owning an investment property comes with financial opportunities, but it also comes with risks. Unexpected damage, tenant-related incidents, or natural disasters can quickly turn a profitable property into an expensive liability. That is why it is essential to regularly review your insurances, ensuring you have adequate coverage for your property and assurance as a landlord.
Understanding the Different Types of Insurance
Many property owners assume that landlord insurance, building insurance, and contents insurance are interchangeable, but each serves a distinct purpose. Understanding the differences can save you from unexpected financial burdens down the line.
Landlord Insurance: Landlord insurance is designed specifically to protect rental property owners from risks associated with tenancies. It generally covers loss of rental income due to tenant default, malicious damage caused by tenants, and legal liability in case of accidents on the property. Some policies even cover emergency repairs and legal expenses if a dispute arises.
Building Insurance: Building insurance covers structural damage to your property caused by insured events such as fires, floods, storms, and vandalism. This includes not just the main residence but also permanent fixtures such as garages, fences, and driveways. However, it is important to note that building insurance typically does not cover tenant-related damages or loss of rental income, which is why landlord insurance is often essential alongside it.
Contents Insurance: Many landlords assume contents insurance is only necessary for owner-occupied homes, but if your investment property is furnished, or contains items like carpets, blinds, and appliances, you may need coverage. For example, if a washing machine leaks and causes water damage to carpets and blinds, a landlord without contents insurance would be responsible for these repairs. In some cases, strata insurance might cover common property, but individual landlords are responsible for insuring their own contents.
Strata Properties: Do You Still Need Insurance?
If your investment property is part of a strata-titled complex, you may assume that the body corporate's insurance will cover everything. However, this is not always the case. While strata insurance typically covers shared spaces and structural elements, it does not protect your personal property inside the unit. Items such as carpets, blinds, and built-in appliances are your responsibility.
A real-life example we encountered involved a washing machine leak that damaged both the owner’s unit and the unit below. The landlord did not have contents insurance, meaning they had to cover the cost of replacing carpets and blinds out of pocket. Additionally, the strata insurance excess had increased to $10,000, making it an even greater expense.
Preventative Maintenance Can Save You Money
Reviewing your insurances should also go hand in hand with preventative maintenance. One simple yet effective measure we have implemented is checking the flexible hoses in all our strata properties. These hoses can loosen over time, leading to leaks that cause significant water damage. We have also assessed the ages of hot water systems (HWS) to replace them before they burst, preventing expensive damage and claims.
By proactively maintaining your investment property, you can reduce the likelihood of needing to make an insurance claim and keep your premiums from increasing unnecessarily.
What to Consider When Reviewing Your Insurance
When reassessing your insurance policies, keep the following in mind:
- Policy Exclusions: Not all policies cover tenant-related damages or loss of rental income. Read the fine print to ensure you are protected.
- Strata Insurance Limitations: If you own a unit, check what is covered by strata insurance and what is your responsibility.
- Natural Disaster Coverage: Ensure your policy covers floods, storms, and other extreme weather events, especially in Queensland.
- Landlord-Specific Protections: Look for policies that include tenant default, malicious damage, and legal liability.
- Claim Excess Amounts: Higher excess fees can reduce your premiums, but make sure they are affordable in the event of a claim.
Review Your Insurance Now
Insurance is not something to set and forget. It should be reviewed regularly to ensure your investment remains protected. The right landlord insurance policy, combined with building and contents coverage, can safeguard you against unexpected financial losses.
At Iconic Realty Group, we prioritise risk management for our clients, ensuring their investments remain profitable and stress-free. While we are not insurance brokers, we recommend consulting with an insurance advisor to confirm you have the best coverage for your specific property needs.
For professional property management and proactive investment strategies, contact us today to learn how we can help protect your assets and optimise your returns.
Disclaimer: This article is for general informational purposes only and does not constitute financial or insurance advice. Iconic Realty Group is not an insurance broker, and we recommend speaking with a qualified insurance professional to assess your specific coverage needs.