Yes, you really need landlord insurance

Landlord insurance is like all the other insurance policies we have in our lives, and if you are like me when it comes to renewal time, you always wonder – do I really need it?

Well, as an investor myself I believe it’s a must. Circumstances can change, and the best tenancy can go pear-shaped. Combine that with the crazy weather the country has experienced during the past six to 12 months, and you would be mad not to have the right coverage in place.

Many owners often misunderstand the difference between landlord insurance and building insurance.  A building insurance policy covers the outside of the property and generally it includes public liability for common areas, such as the driveway, etc.

So the outside is covered, but what about the inside?

Landlord insurance has many aspects of cover.  Firstly it has contents, which includes the carpet, light fittings, blinds/curtains, the property’s appliances etc. (Now this "contents" is not to be confused with the contents owned by the tenant, of which they are responsible to cover if they so choose).

Contents is extremely important – remember the Queensland and Victorian floods?  Some of those investors didn’t have a policy in place and the out of pocket expenses will be enormous depending on the severity of the flood or water damage.

Or what about storm damage? Think about if a large gum tree falls in on your roof and the rain ruins the carpet throughout the house.  That's another example of where a landlord insurance policy would cover you.

The other major aspect of cover is loss of rent.  This provides owners with rental income up to X number of weeks.  The best policies on the market allow for 15 weeks loss of rent.  Loss of rent is payable to an owner when tenants stop paying the rent and are subsequently evicted from the property, when they up and leave overnight, in the event the property is not tenantable (i.e. due to flood, fire, etc.) or in the event your tenant dies.

Policies will also provide cover for malicious damage (not fair wear and tear), accidental damage, public liability and legal fees.

Like anything nowadays there are many different policies on the market to choose from. I have worked with some fantastic policies, but I have seen owners incur considerably out-of-pocket expenses due to taking out the wrong policy.

Now don’t forget to look at the excess payable on the policy you are looking at.  Watch out for those policies who charge anything greater than $300 for an excess.

Lastly, talk to your property manager – they work with these policies every day. They know how to lodge the claims, what documents to include, the questions the insurance company will ask and what the anticipated settlement and timeframe will be.

Leah Calnan is the director of Metro Property Management in Victoria and is the chairwoman of the REIV Property Management Chapter.