Home Insurance - October 26th
Co-author: TJ Ryan If you’re considering purchasing an investment property, chances are, you’ve researched landlord insurance. You may also be asking yourself why you need it if you already have home and contents insurance. CANSTAR explains…– Read more
Landlord Insurance - July 26th
An uninsured investment property is a disaster waiting to happen, so landlord insurance is a must-have for any property investor. It may be a grudge purchase, but who says you can't get a policy that offers value for…– Read more
Landlord Insurance - July 22nd
If you're a property investor, you need to know the red lights to keep a sharp lookout for when choosing a tenant – and a landlord insurance policy.– Read more
Landlord insurance can cover you for different leasing related incidents. Landlord insurance is tax deductible and can cover you for issues involving your tenants or their guests. Including theft, malicious damage and vandalism, loss of rent due to tenant default and legal expenses, if required to evict a tenant.
A good quality landlord insurance policy protects you against a number of things that other home and contents insurance policies do not cover. And the good news is that because it is an investment expense, your policy premium is tax deductible.
There are also policies available to cover short-term rental landlords who use sites like Airbnb, Stayz and Flatmates.com.au to rent out a room in their own home, or a granny flat attached to their property. If home owners aren’t covered and a renter or guest damages their property, they can face paying for expensive repairs on their own. Even worse, they could face expensive public liability claims if a renter is injured while staying on their property – which could amount to hundreds of thousands of dollars.
There are a few different options for short-term rental landlord insurance, including Airbnb’s Host Protection Insurance program, and ShareCover home and contents policies for short-term rentals available from IAG and NRMA.
There are a few things it is crucial to check when purchasing landlord insurance – the terms and conditions, what is and isn’t covered, and the excess that applies if you make a claim. These elements are often very different from policy to policy, so shopping around on the CANSTAR website and reading the product disclosure statements (PDS) for each policy is important.
Price is obviously important because you don’t want your insurance premiums taking a large slice from your rental income. There is a wide range in what you can pay for landlord insurance, so it pays to shop around.
Having said that, you often get what you pay for so you shouldn’t assume that the cheapest insurance policy will provide the best value for money. You can avoid being caught out with a nasty surprise at claim time by looking carefully at both the price and what the provider is willing to cover.
Thankfully, landlord insurance is not prohibitively expensive. For example, our 2016 star ratings have found that those renting out a Sydney unit were only paying 1.5% of their rental income on insurance.
The cost of landlord insurance varies between the states and territories, and also varies by the risk associated with your property’s postcode. Insurers base their prices on factors such as the risk of rental default in an area, the risk of damage by tenants in an area, and the risk of natural disaster in an area.
Beyond the essential inclusions, there are plenty of other features and inclusions you can look for in a policy. CANSTAR researches and rates policies for the following features and inclusions:
A summary of other features considered by CANSTAR is contained in the Methodology attached to the Landlord Insurance Star Ratings report.
What you should look for in a landlord insurance policy depends on working out what insurance needs are important to you. Before you start looking, ask yourself the following questions, among others.
If you rent out a furnished property, it would cost a lot to replace the lot if it was damaged, so contents insurance is a must. Landlords who rent out an unfurnished property might think home insurance for the building only will be enough to cover the property. However, building only insurance doesn’t cover the contents, including carpets or other fittings you might have at a property. Considering how many cyclones and storms tear through Australia every year, you could end up paying for it if you chose building only insurance.
From clawing the curtains to having an accident on the carpet, pets can do a lot of damage to the fittings of a property. Some policies cover damage caused by pets, but some do not – so it’s very important to read the whole PDS of a policy before signing up. If you’re covered, you might be perfectly happy to let Fido or Fluffy live with your tenant.
As many property owners know, flooding can be a major issue when it comes to choosing a place to buy or a place to rent. A river view doesn’t always equal dream house.
How can you check if your investment property is in a flood zone? You should check your state government’s flood maps for your area, or your local council’s planning maps online. In general, properties near rivers or in low-lying areas are particularly prone to flooding.
You might have wonderful tenants – but what about their friends or other guests who visit them? Hopefully you’d never need your optional extras cover for accidental breakages and malicious damage or vandalism, but if something did happen, it’s priceless knowing you’re covered.
The location of a property will affect how much the premiums cost to insure it. Not surprisingly, landlords in cyclone-ridden North Queensland pay the most to insure their properties, with Canstar calculating average premiums, as per the policies assessed for Canstar’s 2015 Landlord Insurance Star Ratings, amounting to 15% of their rental income. Meanwhile, landlords in Sydney pay just 1.38% of their rental income in insurance. Tasmania and Adelaide have the cheapest average premiums for both houses and units. (Figures current at June 2015.)
Written by: TJ Ryan
Please note that these are a general explanation of the meaning of terms used in relation to landlord insurance policy cover. Your insurance provider may use different wording and you should read the terms and conditions of your insurance policy carefully to understand what you are covered for. Refer to the product disclosure statement from your provider.
Accidental damage: Damage caused by an event or incident that you and your tenant did not intend or expect.
Bond: Money paid by a tenant and held as security by the landlord against any possible future property damage, outstanding rent or other costs.
Building replacement value: The amount it would cost you to totally rebuild the property at today?s prices, taking into account any renovations or improvements you have made previously to increase the property’s value.
Certificate of insurance: The Certificate of Insurance is given to you by your insurer for each period of insurance. This important document shows the cover you have chosen and other policy details, and verifies that you have insurance with the provider.
Duty of care: Because insurance is a contract between landlord and insurer, landlords have a duty of care to take all reasonable care to prevent theft, loss, damage, or legal liability. Landlords also have a duty of care to follow all terms and responsibilities set out in the insurance contract.
Duty of disclosure: Landlords have a duty of disclosure to be honest and tell their insurer everything they know or should know, if a reasonable person would consider it relevant to the insurer’s decision to insure someone under the policy. Disclosed information can affect whether or not the provider will insure a landlord, the cost of the premium, and any special conditions that might apply to the policy. A failure to disclose information could result in a claim being reduced or refused, or your policy being cancelled entirely.
Excess: The amount you have to pay for each incident when you make a claim. The amount and type of excess that applies to different types of claims under your policy will be shown on your Certificate of Insurance. You may be able to pay a lower premium if you have a higher excess, but you need to be sure that you could afford to pay the excess if you had to.
Exclusions: Anything not covered by your policy. Exclusions vary between insurance providers.
Fixtures and fittings: Household items or equipment that are permanently attached to the building, such as carpets, curtains, and air-conditioners.
Flood cover: The standard definition of a flood has been updated after the 2011 floods in Brisbane and is now as follows:
“When normally dry land is covered by water that has escaped or been released from the normal confines of:
This does not cover damage caused by the sea, such as a tsunami. If you have concerns about flood cover or other cover, check with your insurance provider.
Forced entry: Unlawful entry into your investment property, including picking locks or using stolen keys. It does not include someone opening an unlocked door or window.
Fusion: The burning out of an electric motor or its wiring, caused by the electric current in it. Common items that might be claimed under fusion cover include washing machines, clothes dryers, refrigerators, and pool filters.
Inclusions: Anything covered by your policy. When a particular event is listed as being included in your policy, the insurer will cover the whole expense or a listed percentage of the cost involved in repairing the damage or replacing damaged items. Excesses may apply to claims.
New for old replacement: A type of cover where if your home or contents are damaged or stolen, your insurer will replace them with new items or repair them with new materials. Many new for old features specify that you can only claim new for old replacement for an item if it is younger than a certain number of years.
Optional cover: This is extra insurance cover above that included in the standard or basic policy. You can ask your insurer to add optional cover to your policy for a higher premium. Common examples of optional cover include accidental glass breakage, or storm damage to gates and fences. Read your PDS to see which optional covers may be available for your policy.
Overdue instalments: If your insurance premium is overdue to be paid, your insurer may refuse to pay a claim and/or cancel your landlord insurance policy without further notification.
Period of insurance: The time you are covered by the insurance, as shown on your Certificate of Insurance.
Policy: Your insurance contract. It consists of a product disclosure statement (PDS) and your latest Certificate of Insurance.
Premium: The amount you pay your provider for your insurance policy. Includes any compulsory government charges or taxes such as stamp duty and GST, and the Fire Services Levy (FSL) if applicable. Your premium must be paid on time for your property to be covered.
Product Disclosure Statement (PDS): The document that contains the terms and conditions of your insurance cover. It tells you what cover is provided, what exclusions apply, premiums and other fees and charges, and any other important information. Your provider will supply you with a new PDS if there are any changes made to the terms and conditions of your insurance product.
Sum insured: Stands for the sum you are insured for. This is the maximum amount you can claim for a particular incident.
Unit: A ‘home unit’ dwelling in the form of an apartment, flat, villa, or townhouse, subdivided according to state or territory laws for strata title.
Unoccupied excess: An insurance provider may charge an additional excess for a claim for a covered incident if your property remained continuously unoccupied for a certain length of time.
If you’re trying to make your own shortlist of products that might suit your needs, you can’t go past the 5-star rated products in our 2015 Star Ratings Report. CANSTAR researches and rates landlord insurance policies, comparing more than 2,600 quotes across seven different regions, and assessing more than 100 different features within 16 categories. Please check any discounts or special offers mentioned below on the website of the relevant provider as information is only correct at time of writing (September 2015).
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