Thinking of renting a property you own?
Becoming a landlord comes with a lot of responsibility, but the good news is that you don’t have to assume all of the risk on your own.
Which is just as well, because horror stories of bad tenants are unfortunately very common and can turn your investment dream into a nightmare.
Landlord Insurance can be a safety net to safeguard your property and long-term financial security.
So before you commit to a policy, here are 4 things you need to consider.
1. Know your rights and responsibilities.
There's a lot of legal due diligence and regulation around being a landlord.
If you don't get it right you can be fined, or worse, it can leave you wide open if you have tenants who don't take care of your property.
If you're not confident that you can manage a property, or you don't have the time, hire a professional, such as a real estate agent.
But remember, just because you're paying for property management, doesn't mean you are insured against damage as Carrie from Engadine, NSW, learned.
"When my tenants moved out, the house was disgusting, and there was about three thousand dollars worth of damage, including a broken garage roller door that they had reversed into.
Their bond came nowhere close to covering what needed to be replaced and they also skipped out owing rent. I didn't have Landlord Insurance.
I learned the hard way that just having agents look after a property is not a big enough safeguard."
2. Protect against damage
To avoid experiences like Carrie's, it's worth investing in a comprehensive policy, which will cover your property from damage caused by a tenant or their guests.
Landlord Insurance can cover damage to the building and certain contents and can also cover for a tenant who falls behind on paying their rent, so protecting your rental income, while you deal with the situation.
The provision kicks in after about one month and you may be completely covered if you ask your tenant to pay one month’s rent as a security deposit.
There are many different variations on what's covered in Landlord Insurance, so carefully read the Product Disclosure Statement (PDS) so there are no surprises when you come to make a claim.
Also find out what the policy does NOT cover
Again always read the PDS carefully to make sure that your property receives the coverage for anything and everything it may face.
Plus consider your excess amount.
If you want to be able to claim for smaller items that are say, less than $250, you may have to bring your excess down.
3. Select the right cover for the kind of rental you offer
With the advent of the shared economy, the rental market has changed in Australia.
You may choose to rent your property out for six months through Airbnb for example, or for shorter holiday rentals such as weekends.
Or you may want the freedom of mixing it up and doing longer and shorter rentals as Libby does with her investment property at Port Stephens.
"We rent our property through Stayz during summer and peak season, but then have tenants for 6 months or more over winter.
Often with holiday rental we supply linen and extra furniture, that we don't for the longer rentals, so we needed to be covered for both," explains Libby.
Holiday or shorter term rentals may have different insurance needs from longer terms rentals that have a tenancy agreement.
So it's important to check that your Landlord Insurance covers you for all scenarios.
4. Factor in the property's environment
Take the time to investigate your options and choose a policy that matches the exact needs of your property based on its environment or condition.
For example, if your property is near a body of water, you should be sure that your landlord insurance covers your property against flooding.
Alternatively, if your property is located near a bushfire prone zone, it's wise to consider a policy that covers potential bushfire damages.
Finally, compare Landlord Insurance quotes.
Once you know exactly what you need in terms of premiums and extras that best fit your property, it’s time to get shopping around, and comparing landlord insurance quotes online to make sure you get the best possible deal.
Don’t forget, cheaper does not always mean better when it comes to Landlord Insurance policies.
Paying the cheaper premium may be tempting now but it doesn't pay off in the long run if you have to make a claim and you aren’t covered.