Why Landlords Should Take Out Appropriate Insurances
While many landlords try to minimise their outlay and maximise their return – and understandably so – insurance is the one essential expense you simply can’t afford to scrimp on.
It’s so important that you are adequately covered with suitable landlord insurance, so that the following scenarios don’t cripple you financially.
SCENARIO 1: YOUR PROPERTY BECOMES UNINHABITABLE
When purchasing property, it is important to acknowledge vacancy rates and days on market for your chosen suburb in case the property stays vacant for months and therefore allowing you to set aside appropriate funds to cover it. However, what if the property becomes un inhabitable due to damages outside your control e.g fire or flood. Sure, your building insurance will cover the repairs, but what about the loss of rental income? This also applies if your tenant absconds.
SCENARIO 2: YOUR TENANT GETS NASTY
This is not relating to normal wear and tear here, bur rather malicious damage caused by the tenant which affects your ability to let the property or will cost you an arm and leg to fix. Yes there are legal channels that you can go down to recover costs, however this can sometimes be a timely exercise and cost more than what its worth.
SCENARIO 3: YOUR WALLS ARE INSURED BUT THE CONTENTS ARE NOT
As you would normally take out home and contents insurance on the property you live in, it is encouraged to look at your investment properties with the same view. Yes I do agree with you, its up to the tenant to take out their own contents insurance but what about the curtains, blinds and other fixtures and fittings that are in the house.
SCENARIO 4: YOUR TENANT IS AS DODY AS THEY COME
Being covered in the event that your tenant turns out to be a bad apple is priceless. However there are cases where they decide to stop paying rent, skip town or decide to steal your fixtures and fittings. Therefore having the appropriate cover will eliminate the financial suffering as you would be able to claim.
SCENARIO 5: YOU HAVE TO GO TO COURT
If you end up in the unfortunate position of needing to take a tenant to the tribunal, you may need legal counsel. As anyone who’s ever hired a lawyer will know, it doesn’t come cheap – it’s often hundreds, sometimes thousands of dollars per day depending on their expertise. Cover yourself for legal fees so you don’t have to pay the whole bill out of your own pocket.
SCENARIO 6: SOMEONE IS SERIOUSLY INJURED
Perhaps the most important, yet often overlooked type of insurance for any landlord is public liability insurance. Should one of your tenants or their guests incur serious injury at the property, the damages awarded to them could be in the hundreds of thousands. Public liability is a must.