Have you recently purchased an investment property and you’re now looking to rent it out? Landlord insurance or investment property insurance is going to be essential. Here at Your Choice Realty in Forest Lake, we regularly assist our clients with navigating the many obstacles involved in investment property. To help you develop a clearer understanding of landlord insurance and investment property insurance, we’ve put together a helpful guide below.
What is landlord insurance?
Renting out your residential property poses many risks including theft, property damage, legal expenses and unpaid rent. While you can thoroughly screen your potential renters and run background and credit checks to reduce this happening, the risk is still there.
If this is your first time as a landlord, you may think that your homeowner’s insurance will cover these costs. Only landlord insurance or investment property insurance can do this. Aside from property coverage, the policy also offers insurance for any possessions owned by the landlord that are inside the property.
What does and doesn’t landlord insurance cover?
The two types of landlord insurance coverage are property protection and liability protection, both of which aim to protect the landlord from financial damages.
This refers to the protection of physical assets associated with your rental home, such as the property itself and any equipment or tools on site that helps maintain it. This covers damaged property caused by events such as natural calamities like a fire, earthquake, flood or storm.
This refers to the coverage of your legal expenses or a person’s medical bills if they sustain an injury on your property for rent and you are responsible for it.
Consider the location, neighbourhood and conditions of your rental property. See if they may need some additional landlord coverages such as the following:
- Theft – your insurance will help you pay for damages of your property in the event of a break-in
- Vandalism – normally, landlord insurance does not pay for vandalism damages, unless you purchase this specific coverage.
- Rental property renovation – when you want coverage for renovating your property. This protects your rental space up until it’s ready to take tenants.
What the landlord insurance doesn’t cover
While there are several coverages included in the insurance, there are also factors they do not cover. These are:
- Mould outbreaks
- Wear and tear – if the damage is caused by a malicious act or an accident, the insurance typically doesn’t cover a property’s general wear and tear
- Damage or loss of tenant property – unless it is caused by the landlord, tenants will have to deal with the repairs of the property
- Maintenance – throughout the renter’s occupancy, it is their responsibility to maintain the property
What’s in a trustworthy landlord insurance policy?
Because there are many landlord insurance policies out there with different types of coverages, you must choose the right policy that suits your needs.
Consider these three key elements:
The price you pay
You may be inclined to get the cheapest insurance policies to save money, but this isn’t always the wisest choice. At the same time, you don’t need the most expensive policies that go beyond what you can afford. Shop around for the coverages you need for your property and see if you can find a provider that meets your price and expectations.
Find the right inclusions
As you shop for the policies, you might take these into account as well:
- Damage or loss caused by guests, tenants or their animals
- Theft or loss of property caused by guests or tenants
- Damage due to natural disasters (check if your location is disaster-prone)
- Legal costs related to the eviction of a renter
- Public liability coverage for someone (including yourself) who sustained an injury while in the property
Sometimes, the policies we need come as extras. See if the provider of your choice has the coverage you want, like tax audit insurance, reletting fees following a renter eviction, as well as door key and lock replacements.
Need more investment property advice?
We’re the experts when it comes to investment properties, including advice on landlord insurance. Get in touch with the team at Your Choice Realty in Forest Lakes today on 07 3278 9200.