In our discussions with a landlord prior to taking on management of their investment property, we always ask whether landlord insurance has been arranged. In what can be a hectic time finalising a property for rent, this critical insurance can sometimes be overlooked.

It is essential. Let’s find out why.

What is landlord insurance and what does it cover me for?

First, let’s cover off what landlord insurance actually is. Landlord insurance is an essential insurance cover for a landlord, covering many aspects of their investment property beyond typical home and contents insurance products.

For a relatively small cost, a landlord can have coverage for damage to buildings and contents as well as for rental default and damage by tenants.

For example, landlord insurance typically covers the landlord for the following (and much more):

  • Loss of rental income – for example, if a tenant vacates without giving the agreed notice, vacates without paying rent which is owed, if a tenant dies during the lease period, or if the property is untenantable
  • Building and contents – covers for accidental loss or damage to contents, deliberate or malicious damage to the property, pet damage, scorching such as cigarette burns
  • Additional expenses – in some circumstances the insurance will cover cost such as legal expenses, cost for engaging a sheriff to evict a tenant, replacement of locks, removal of a tenant’s goods

The above points are a sample of what landlord insurance provides coverage for. We’ve seen countless instances where landlord insurance pays for itself many times over, when the unexpected happens.

Does landlord insurance cover the tenant’s goods?

Importantly, landlord insurance will generally only cover items owned by the landlord, not by the tenant. This is an important distinction, and one which we educate each new tenant on as they commence their lease.

Research by the Insurance Council of Australia found that 74 percent of renters do not have contents insurance. Worse still, they are twice as likely to need to make a claim for theft or burglary.

Many renters are of the incorrect understanding that their landlord is insured, therefore they don’t need to be. Not true! We try to ensure our tenants are aware of this and take up appropriate cover before it’s too late and they actually need it.

What are the most common landlord insurance claims?

According to leading landlord insurance provider Terri Scheer and various other sources such as domain.com.au and canstar.com.au, the most common landlord insurance claims are for:

  1. Loss of rental income – largely due to absconding or defaulting tenants failing to pay rent
  2. Malicious and accidental damage – including such activity as holes punched in walls, doors that have been kicked in, and damage and vandalism to carpets and floors
  3. Water damage – this is distinct from flood or storm water damage, and relates to  water damage from appliances and fittings, such as leaks, burst pipes, and sinks, etc.
  4. Death of a tenant – perhaps surprisingly, the fourth most common landlord insurance claim is due to death of a tenant. While this would be a difficult time for all and compassion and care are of course required, your investment property is a financial investment and must continue to generate income.
  5. Storm damage

When should I get landlord insurance?

Generally, landlord insurance should be taken as soon as you have purchased the investment property. Remember, cover can be started at any time but can’t be backdated. As a landlord you have liability exposure from the time you or your property manager begin showing potential tenants through the property.

If you have any questions about establishing landlord insurance for your investment property, or any other matter related to property management across Newcastle and Lake Macquarie, contact us today. We’re always happy to help.

Carnelian Property Management is a family-owned business offering expert rental property management across Newcastle and Lake Macquarie. Their highly accessible and personal approach has delighted Newcastle and Lake Macquarie property investors since 2011.