06 Feb 13
A common mistake people new to the investment property scene can make is to take out standard building insurance to cover their investment. Usually, they already own a principal place of residence which they cover with general home and contents insurance. They assume that, now they have an investment property, the same type of insurance that they have on their home will suffice for this newly acquired property.
When a lessor (owner) and a tenant enter into a tenancy agreement, and that agreement is signed by both parties and lodged with the relevant government authority, there exists a legal relationship between the two parties. With the dwelling now occupied by someone other than the owner, there is a higher level of risk associated with that relationship. This risk needs to be covered by a specific type of insurance called landlord insurance.
All Residential Real Estate is a professional property management company with hundreds of investment properties in their care. They consider landlord insurance to be absolutely essential to protect their clients' investments. In fact, so serious are they about this issue that, whenever they accept new rentals, it is one of the first questions they ask of the owner.
Tenants Create Different Types of Risks
Landlord insurance typically covers all the same types of risks as those of ordinary home insurance. This includes events such as fire, explosion, earthquake, theft, vandalism, fallen trees, damage by animals and quite a number of others. However, the risks that a tenant creates are also covered by landlord insurance. These risks are typically events such as rent default and the associated legal costs, wilful damage by a tenant, theft or attempted theft by a tenant, and loss of rent if the property is uninhabitable due to the actions of a tenant.
Investors work hard to build up a rental property portfolio. They also provide a valuable service by making rental housing available for those people who do not have their own homes. Having a rogue tenant wilfully destroy a property may not happen often, but when it does, the owner with landlord insurance to cover such an event can easily bounce back. The property can be quickly made habitable again and the losses recouped.
Property investors who place their valuable asset under management with All Residential Real Estate are very unlikely to experience such a distressing situation. The agency has a rigorous process for selecting tenants and recommends strongly that their property owners have suitable landlord insurance.
Check the Insurance Options before Signing
The other vital cover that landlord insurance typically offers is legal liability, with some insurance companies offering cover up to $10 million. Some companies are also offering flood insurance for new policies taken out after 1 February 2012. Most insurance companies offer optional extras and claims excess, so it is important to read the information carefully and compare what is on offer before making a decision.
It is simply not worth the risk to rent out an investment property without having the correct insurance. Most tenants are responsible, reliable and look after their rental properties, but it just takes one bad experience for an investor to incur considerable financial loss. Go to www.realestatewollongongnsw.com.au for more information about property management and ask All Residential Real Estate about landlord insurance.