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Insurance Explained
By Sarah Barton, Terri Scheer Distribution Channel Manager
Many landlords and property managers value the peace of mind that comes with knowing their rental properties are adequately insured.
But with different insurances available, it can be difficult to know which types of policies are best suited to landlord needs.
When it comes to building, strata and landlord insurance, how do landlords find their way through the maze?
Standard building and contents insurance
Standard building and contents insurance is primarily designed for owner occupiers and is the type of policy that most people have to cover their free-standing home and personal possessions.
A standard home and contents policy might offer insurance cover for the building when occupied by a tenant, but is unlikely to provide cover for many actions by the tenant that can result in financial loss for the landlord.
As a result, it won’t often cover landlords for the specific risks associated with owning rental property.
These risks include damage to the property by a tenant, loss of rental income as a result of property damage or a tenant absconding and legal liability for occurrences on the rented property that cause death or bodily injury.
Landlords need specialised landlord insurance if they want to be covered for these types of risk.
Strata insurance
In a strata-titled apartment situation, strata insurance is held by the body corporate and paid for by owners’ levies.
Under a strata title, the body corporate is legally responsible for insuring the buildings at the strata-title site, as well as the owners’ legal liability for common property areas.
This includes insuring the roofing, walls and the owners’ legal liability for shared walkways and common garden areas.
However, strata insurance usually doesn’t extend to cover the interior of individual units including internal wall coverings, curtains or removable flooring such as carpet or floating floors.
This means that if a tenant damages the property or simply stops paying their rent, the landlord may be left out of pocket if they don’t have landlord insurance in place.
Confusion about the level of cover provided by strata insurance can leave landlords at risk of legal liability claims.
If a tenant or visitor injures themselves in a common area of the strata title development such as a shared walkway, any subsequent legal liability claim should be handled by the strata insurer.
But if a tenant or visitor injures themselves while they are inside a rented apartment, it is the landlord who can be found liable.
In order to be covered for legal liability inside the rented apartment, the landlord will ordinarily need a separate landlord insurance policy.
Landlord insurance
Landlord insurance is specifically designed to cover landlords against listed actions by tenants. In the case of a stand-alone building, it can also cover the building itself.
Some of the specific risks that landlords face are damage by a tenant, theft, legal liability (as landlords) and loss of rental income.
These risks are specific to landlords and unlikely to be covered by standard building and contents insurance or strata insurance policies.
Because of this, landlords should be aware of the availability of insurance policies that are specifically designed to address these needs.
Even the best tenant can accidentally damage a property or suffer financial hardship that leaves them unable to pay the rent.
Landlords who don’t have landlord insurance really should think about how they would manage if they were faced with these types of financial losses.
Which landlord insurance policy should you choose?
It’s always a good idea for landlords to read over the policy wording they are interested in, before they make a purchase decision.
For example, different insurers will have varying conditions and definitions for loss of rent cover.
Not all policies include cover for loss of rent if the tenant absconds or dies, if they leave the property unable to be tenanted while repairs to damage are made, or if access to the rented property is prevented due to an insured event occurring.
Landlords should always read their product disclosure statements carefully so they know what they are and aren’t covered for.
Disclaimer:
Insurance issued by AAI Limited ABN 48 005 297 807 AFSL 230859 trading as Terri Scheer. Read the Product Disclosure Statement before buying this insurance and consider whether it is right for you. Contact Terri Scheer on 1800 804 016 or visit our website at www.terrischeer.com.au for a copy. The Target Market Determination is also available.
The information is intended to be of a general nature only. Subject to any rights you may have under any law, we do not accept any legal responsibility for any loss or damage, including loss of business or profits or any other indirect loss, incurred as a result of reliance upon it – please make your own enquiries. This article has been prepared without taking into account your particular objectives, financial situation or needs, so you should consider whether it is appropriate for you before acting on it.
