Building and landlord insurance should not be scrimped on says Toby Balazs, CEO of realestateview.com.au.
"Your property may need unforeseen building repairs, or you may have tenant related issues including damage to your property or issues relating to loss of rent.
"It's vital to ensure you have insurance to protect your rental income," says Mr Balazs.
It's vital to ensure you have insurance to protect your rental income.Toby Balazs, CEO, realestateview.com.au
According to the Insurance Council of Australia, the peak body for the general insurance industry, if you own a rental property, or you are a tenant, you may need different insurance products than normal home and contents policies.
The Insurance Council say that landlords should consider how they can protect their premises, its assets and the income they receive from their tenants.
Renters are not covered by their landlord's insurance policies. Insurers offer products designed for renters, including low-cost policies.
If you are a landlord, you have some additional risks to your property that you should cover.
Landlord building and contents insurance usually covers your building against risks from catastrophes, such as fire, storms and other natural disasters. It will usually include cover for the fixtures such as light fittings, carpets, ovens, stovetops and window coverings.
You can also protect yourself from financial loss caused by damage to your rental property by your tenants or their guests, and loss of income due to unpaid rent.
A landlord's policy will include accidental damage caused by tenants, theft of your property by your tenants, malicious damage caused by tenants, and loss of rent due to tenants leaving without paying.
Covering missing rent
Landlord insurance can cover the loss of rent that you might experience because damage has left your property unable to be leased. If missed rental payments will cause you financial stress, look for a condition in your insurance policy that will cover you for missed rental payments.
Landlord insurance may protect you from loss of rent due to tenant hardship, which occurs when a court awards your tenant a release from their obligation to pay rent for a certain period of time due to hardship (for example, if they are unable to work due to injury or illness).
Another option under landlord insurance policies includes covering your legal expenses if you have to take action against a bad tenant.
Specialist landlord insurance providers will sometimes even include the cost of replacing locks on the property if your tenant has vacated the premises and has not returned the keys.
Short-stay landlord insurance
If you are a landlord of a short-stay rental property, such as a holiday rental, and your property is professionally managed, you can get a short-stay landlord policy which covers situations unique to holiday properties.
These can include the death or serious illness of a guest and consequent difficulty in subsequent rentals, and failure to give vacant possession when a short stay tenancy is complete.
More information: understandinsurance.com.au.