With a wide range of options in the market today, how do you compare landlord insurance to find the right one?
One of the most important things you can do as a landlord is get proper landlord insurance. This protects your rental property and tenants in the event of damage, lawsuits, and loss of rental income.
But not all landlord insurance policies are created equal.
Taking the time to compare policies from different providers thoroughly is crucial to finding the right coverage at the best price.
Here’s what to consider.
First, What is a Landlord Insurance Policy?
Landlord insurance is a specific insurance policy designed for property owners who rent out their properties to tenants. It covers various potential issues, including property damage, liability costs, and loss of rental income.
However, the exact coverage depends on the policy and provider.
Key Components of Insurance For Your Investment Property
There are a few key details to consider when taking out landlord insurance coverage.
Building and Contents Cover
Building insurance offers protection for the physical structure of your property, including walls, roofs, and fitted kitchens, among other permanent fixtures. Contents insurance, on the other hand, covers detachable items within the property that you own, such as appliances and furniture.
Rent Default or Loss of Rent Cover
This component covers loss of rental income due to various insured events such as tenant eviction, death of a sole tenant, or failure to pay rent.
Public/ Legal Liability Cover
Public liability insurance covers legal and medical costs associated with injuries on your property.
Legal Costs Cover
Assists with legal fees incurred in evicting a tenant or making a legal claim for rental loss.
Malicious and Accidental Damage Cover
The coverage extends to both intentional (malicious) and unintentional (accidental) damage caused by tenants or their visitors.
Pet Damage Cover
If you allow pets on your property, consider coverage for damage caused by pets.
Disaster Cover
This provides coverage for damages and loss of rent due to natural disasters such as floods or bushfires.
Change of Locks Cover
This covers the cost of changing locks after a claim, such as when a tenant leaves with your keys.
Things to Consider When Comparing Landlord Insurance Cover
Beyond being aware of the components of your policy, there are several coverages and factors you need to consider when looking at different policies to protect your investment property, including the following:
| Factors to Consider | Details |
| Coverage amount | Make sure the policy has adequate dwelling coverage to completely rebuild your rental property in the event of a total loss. Also, look at the loss of rent coverage limits to cover lost income if the property is uninhabitable. |
| Covered risks | Compare named peril policies that cover specific listed risks versus open peril policies that cover all causes of loss except those excluded. Ensure common risks like fire, lightning, theft, water damage, etc. are covered. |
| Liability protection | Look at the liability limits to cover injuries, property damage, and lawsuits. Higher limits are better for higher-value properties. |
| Loss of rent | Check how much loss-of-rent coverage is included. You want enough to pay the mortgage and expenses during vacancies. |
| Deductibles | Lower deductibles mean lower out-of-pocket costs if you file a claim, but also higher premiums. Compare tradeoffs. |
| Discounts | Ask about discounts for things like multi-policy bundles, security systems, etc. This can help lower premiums. |
Tips for Comparing Landlord Insurance
When it comes time to get quotes and compare options, keep these tips in mind:
- Use online comparison tools to get multiple quotes side-by-side easily. This allows you to see differences in coverage, limits, and pricing quickly.
- Work with an independent insurance broker who can shop rates from multiple insurers to find you the best deal. Their expertise can be invaluable.
- Don’t assume all policies are equal; ask insurers to explain coverage and limits clearly. Dive into the details.
- Carefully read policy documents, look up definitions of key terms and confirm exclusions. Don’t gloss over the fine print.
- Consider bundling your landlord insurance with other policies like home or auto for multi-policy discounts.
- Look for insurers that offer premium discounts for safety features like smoke detectors, security systems, etc. This can add up over time.
- Pay close attention to loss of rent coverage, liability limits, and rebuilding cost coverage amounts based on your specific property.
Key Takeaways
Finding the right landlord insurance policy takes some work, but it’s worth the effort. The right landlord insurance coverage can give you peace of mind and financial protection in the event of property damage, lawsuits, and loss of rental income.
Follow the tips in this article to compare policies and make sure you have:
- Adequate dwelling coverage
- Loss of rent coverage
- Liability protection
- Coverage for common risks.
And be sure to thoroughly compare policies from leading insurers like Duo Insurance to find the best match for you.
Reach out today to start reviewing your options and get personalised quotes.
FAQs
What Type of Insurance Do Landlords Need?
Landlords need landlord insurance, often called rental property insurance. This protects against property damage, loss of rental income, and liability claims. Standard policies include dwelling coverage, loss of rent coverage, liability coverage, and more. Landlords should look for a policy designed specifically to meet the needs of rental properties.
How Much Dwelling Coverage Should I Get?
Your dwelling coverage limit should equal the full replacement cost to completely rebuild your rental property in the event of a total loss. Factor in construction costs in your area, as well as the size, features, and quality of your property. An insurance agent can help you properly estimate the rebuilding costs. Underestimating can leave you underinsured.
Why is Loss of Rent Coverage Important?
Loss of rent coverage provides reimbursement for lost rental income if your property is uninhabitable due to a covered peril like fire or storm damage. It covers your mortgage, taxes, and other expenses until the property can be repaired. Without it, you’d have to pay these bills out of pocket. Match the limit to your typical monthly expenses multiplied by the estimated repair time.
How Much Does Landlord Insurance Cost?
The premium you pay for landlord insurance can vary quite a bit based on the unique factors assessed by each insurance provider. These include the age and value of the rental property, its location and risk of natural disasters, the type of dwelling, and more. With so many variables, there is no standard “average” cost.
But here are some things that impact pricing:
- Older homes or those in high-risk areas will typically cost more to insure. Newer buildings in low-risk locations can have lower premiums.
- Higher property values mean higher rebuild costs, which increase premiums. Lower-valued rentals have lower premium costs.
- Multi-family buildings like apartments carry more risk than standalone homes, increasing insurance rates.
- You can lower your premium by choosing a higher excess but make sure you can afford the out-of-pocket cost if you claim.
- Online discounts, multi-policy bundles, and no-claims bonuses can also help reduce your total insurance costs.
How is Landlord Insurance Different from Home Insurance?
Landlord insurance is designed for rental properties, while home insurance is for owner-occupied residences. Key differences include the following:
- Landlord insurance has higher liability limits to protect against tenant lawsuits. Home insurance usually has lower liability coverage.
- Loss of rent coverage is included in landlord policies but not in standard home insurance.
- Landlord policies use the actual cash value of the personal property, while home insurance pays replacement costs.
- Landlord insurance covers lost income from the property, while home insurance does not.
- Discounts like multi-policy bundles may only apply to home insurance, not landlord coverage.
So, while they share similarities, landlord insurance contains provisions specific to the risks faced by rental properties.
Is Landlord Insurance Tax Deductible?
Yes, landlord insurance premiums are considered a deductible expense for rental properties. When filing your investment property taxes yearly, you can deduct 100% of your landlord insurance payments to lower your taxable rental income. Maintain records of premiums paid to document the deduction.
Is Landlord Insurance a Legal Requirement in Australia?
There is no nationwide law making landlord insurance mandatory in Australia. However, the state of Tasmania does require property owners to carry landlord insurance under the Residential Tenancy Act. Some mortgage lenders may also require you to have a landlord insurance policy if the rental property carries a mortgage loan. While optional in most of Australia, it is still highly recommended to protect your investment.