It would be monumentally difficult to argue that the term “landlord’s insurance” exudes even a hint of excitement. The term is one that contains the potential to send even the most conscientious and diligent rental property owner straight to sleep. That is fair enough, most likely. What landlord’s insurance lacks in excitement, however, it makes up for – with a considerable surplus to spare – in complexity and, thus, in fascination. As well, when one considers that landlord’s insurance is a non-negotiable component of rental property ownership, it suddenly begins to sparkle with a high degree of interest. This interest, once pursued, may prove to be somewhat overwhelming due to the sheer breadth and depth of information contained in the various policies. Remembering that its primary purpose is to, first and foremost, protect your investment and mitigate the risk of liability, navigating the vast and detailed depths of landlord’s insurance becomes considerably less daunting.

In January 2021, the Victorian State Government will introduce new laws that many landlords perceive as “pro tenant”, including provisions related to longer leases, greater flexibility and home decorating (ie picture hooks). As such, now more than ever, a landlord’s insurance policy is essential. There is an ever-present risk in the landlord-tenant relationship to adopt an “us versus them” attitude. This type of an attitude, of course, does not lend itself to a healthy and symbiotic relationship. Landlords need tenants and vice versa. A mutually beneficial outcome is very much necessary and very much possible. As a rental property owner, the right insurance policy can help facilitate this mutual benefit.

There exists a plethora of common risk protections related to leasing an investment property. These include tenant/guest damage, missed payments, tenant/guest theft, pre-lease expiration vacating, or what is commonly known as a lease break, legal expenses arising as a result of any number of various disputes, loss of rent resulting from the property becoming uninhabitable, say, due to fire and/or flood damage, flood damage to fittings and/or fixtures as well as public liability and liability for injury to the tenant or their guests, such as explosions or the death of a tenant. Life is unpredictable. As a landlord, life is considerably more unpredictable. Because of this fact, it is important for rental property owners to take the appropriate steps to arrive at what may be referred to as “adequate protection”. What exactly, though, is adequate protection?

Adequate protection can be simply described as an insurance policy which covers the risks associated with your specific property, as well. For example, crime rates, pet ownership, natural disaster areas, liability issues based on the existence of potential injury areas in and around the property, specialised requirements such as requiring strata insurance for a strata title and holiday lets (short-term versus long-term stays) are but a few considerations when attempting to find the right policy capable of providing the ideal adequate protection. Is your rental property furnished? If so, then contents insurance will be required to protect the furnishings… and even if it isn’t a certain amount of contents insurance may be required to cover things like blinds, light fittings and carpets. The key point here regarding adequate protection is that the landlord’s insurance policy MUST extend beyond the common risks discussed previously. In other words, a policy covering common risks only may not provide adequate protection.

Obviously, the issue of cost is a high-priority variable when choosing the policy which best meets your needs. Not surprisingly, cost is dependent on a variety of factors and, as a result, is unfortunately a very grey area. Remember, however, that landlord’s insurance is classified as an investment expense, with the policy premium wholly tax deductible. Many of the factors that were utilised in ascertaining what constitutes adequate protection for your property, as described above, are also the factors which determine the outcome of cost. A degree in mathematics is not required to understand that as policy cost increases, rental income decreases, so it is of the utmost importance to give your quest due diligence and compare multiple policies very, very carefully. There will be excess considerations, as well. Finally, and quite possibly most importantly, always, always, always read a policy’s PDS, product disclosure statement. The PDS provides specifics on the degree of common risk coverage, for instance. If lodging a loss of rent claim, how much of the rent total is covered and for how long? It literally pays to comb the PDS. Be patient, take your time and do your homework. An appropriate landlord’s insurance policy will help build a mutually beneficial relationship for both you and your tenant(s) and will give you the priceless peace of mind knowing that your investment property is adequately protected.

The landscape of landlord insurance has changed. Whilst some insurers have been quite generous during the COVID-19 pandemic, despite strict policies, others have refused new policies and gone back to the drawing board to minimise their risk of loss. The new laws coming in and a post-pandemic reality make these interesting times.

Please contact Kay & Burton Concierge on 03 9825 2000 or via concierge@kayburton.com.au for a landlord’s insurance referral. 

For more information about Kay & Burton Concierge, please visit https://kayburton.com.au/concierge.


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