If you are a new property owner, or looking into property management generally, insurance is a no-brainer consideration. Equally though, it's not the easiest of topics to discuss since insurance is often complicated and broad to excruciating degrees. In this article, we are going to talk about a few key basics of landlord insurance, a valuable risk management strategy for people renting out their property.
Definition
"Home and contents insurance" is a common thing that almost everyone knows about, but landlord insurance is less common, so let's quickly define it. To bring it down to the simplest definition, it protects against actions taken by tenants to your property and contents, such as damage that they cause, or non payment of rent. The latter especially is a common stress point for investment property owners in today's climate, where the tenant might just legitimately not be able to make payments, payments you may be relying on for mortgage purposes. Of course protection against the rowdy tenant (their guests are also usually included!) is also valuable, since home repairs can stack up in cost quickly.
Another quick point to make here is that since it is an expense on the property, landlord insurance is very possibly going to be a tax break for you, if you negatively gear. So be sure to keep track of your expenses in relation to insurance!
Limitations
Like almost any financial service, there are things that you should be aware of. For example, insurance is going to cover things in the future, not things that have already happened. This includes rental payments, so if your tenant is already behind in their rent, it's incredibly unlikely you will get relief on this point. Being precise is also going to be important. The 'contents' side of landlord insurance is going to cover your contents, not the tenant's. For example, if you supplied furniture such as a couch, that would be covered, but the same couch supplied by the tenant would not be. Another example of precision being important is limits; be sure to know how much you are going to be covered for if there is missed rent, or if tenants don't return their keys and you want the locks changed. Similar to any contract, reading the fine print will be essential, and if you aren't happy with the precise offer being made, either ask the questions or shop around further.
Summary
Landlord insurance is something that is important to be precise with, but helps to take some of the stress away from property management, such as tenants missing payments, or damage caused by tenants. So if you've just seen your real estate agent and closed the sale on your investment property, be sure to give landlord insurance consideration. If you have questions on this topic or anything else, be sure to give House Estate Agents a call today.