Insurance for your Investment Property – What do you need and why?

Insurance for your Investment Property – What do you need and why?

Insurance for your Investment Property can be confusing, and sometimes misunderstood. With so many different types of insurance to consider i.e. Building and Contents Insurance, Public Liability Insurance, Landlord Insurance; what do they all cover, and what do you really need? Your Insurance needs for your Investment Property can also vary depending on your personal
circumstances, as well as the circumstances of your property. We have included some useful information below to help you make the best decision for your Investment.

Building and Contents Insurance
The most common Insurance a Landlord has with their Investment Property. Building Insurance is a must have for any property and generally covers the building itself, i.e. walls, ceilings, doors,
windows, kitchen, bathroom etc. Although each policy can vary in the scope of what they cover, most Building Insurance policies will not cover internal content items such as window coverings, carpets and other similar items that are not classified as a fixture. It is advisable to insure the contents as well to make sure these other items are included. Tenants are responsible to insure their own belongings throughout the Tenancy. Many Building Insurance policies also include Public Liability Insurance.

Public Liability Insurance
Public Liability Insurance is the general Insurance for ensuring that settlements to injured persons under Civil law are paid. Because it is a general mechanism, Public Liability Insurance covers a very wide range of risks and circumstances. This is also critical to have with your Investment, in case any persons receive an injury at the property and decide to take legal action. The last thing you would want is to have to pay out large sums of money for a legal defense and compensation!

In our modern world, the likelihood of legal action – especially in Property Management – is becoming more and more prevalent. Even having a professional Property Manager looking after your
Investment does not guarantee freedom from litigation. With this in mind, we recommend having a Public Liability Insurance policy in place as an absolute must.

SPECIAL NOTE: Some unit complexes may have their own Building Insurance policy in place through the Body Corporate, however we highly recommend that you evaluate this to see what is included with this policy. Often, these policies may not include the internal areas of your unit for  Building or Public Liability Insurance – which can represent a very significant risk! If you find yourself in this position, consider getting your own Building & Public Liability Insurance policy in place to make sure you are covered.

Landlord Insurance
Landlord Insurance is a special type of insurance specifically for an Owner with an Investment Property. Generally speaking, it covers loss of rent and malicious damage when a Tenancy ‘goes
bad’, as well as loss of rent due to another ‘insured event’ i.e. fire, theft, storm damage etc. The scope of the Landlord Insurance Policies available can vary significantly, including some Building Insurance policies that cover only some components of ‘Landlord Protection’ built into the policy. Landlord Insurance can save you a lot of money under certain, unfortunate circumstances. It helps to cover you for claims that may arise when the Tenant’s situation unexpectedly changes.

In summary, there are many options for Insurance with your Investment. There are many providers of Insurance, with many different pricing levels and levels of Insurance cover. Ensure you have sufficient cover within the Insurance you choose is vital in making sure your interests are covered.

Source: Travis Henke, Real Estate Dynamics, 2016