Buying an investment property is a wonderful achievement and an excellent asset you could own. It is likely among the most expensive assets you will ever own. For this reason, it is important to protect it. Landlord cover is one was to do this.
It is very common for a landlord to rely on it generating a regular income stream through monthly rent. Therefore investors need to acknowledge the importance of landlord cover. Protecting your income stream is a critical risk management strategy. If the regular rental income ceased, many investors may be threatened with a cash shortfall of meeting the loan repayments.
Many investors are starting to appreciate the importance of landlord cover, but some still fall into a trap of thinking cheaper is better. This is unfortunately not true.
This article is to help you take the first steps to understanding some of the risks associated to investing in property. We aren’t insurance advisers, so we refer our buyers to brokers who understand the terms and condition. They recommend an appropriate policy for you and your investment property.
Your exposure to risk as a landlord comes from two major sources. Potential damage to your property and harm to your tenants.
- Rental default – Rental income is part of your overall investment return. It can be used to repay a loan or perhaps provide an income stream in retirement. Even the best tenants can sometimes experience some unpleasant financial circumstances. Causing them to be unable to pay the rent for some time. This can be due to a job loss, a medical condition or a family crisis. Don’t mislead yourselves expecting the tenants bond to cover it all. It may not cover all of your losses. Good landlord cover can help protect against these situations.
- Property damage – Most tenants respect your investment property, especially if its in a great location. However unfortunately damage can occur accidentally. This can prove a costly exercise to a landlord. It may incur a large repair bill or significant replacement costs. Once again a good landlord cover policy can help protect you against these scenarios.
- Liability – This is a situation that can be quite ‘tricky’ and very misunderstood. If your tenants become hurt or sick while living in your investment property, you could be found legally responsible. This is a grey area and legal advice would be required. There are many costs that can be incurred if you are found liable. For example medical costs or legal fees to name a couple. These costs can be significant and long lasting issues. Landlord cover can cover these uncertain costs.
- Fire damage – Yes we have fire alarms or sprinklers to reduce this threat, but a fire can property’s structure. Landlord cover can provide protection against this form of risk.
- Death of a tenant – This is a sensitive and traumatic situation. As a landlord, showing compassion to your tenant(s) is of high importance. Unfortunately the list of issues and financial difficulties can vary greatly… Landlord cover can be one of the best risk management strategies to support you through it. Any legal expenses and potential loss of rent incurred can be covered.
- Water damage – Many people think this is a less common occurrence. However, you’d be surprised to discover water damage is one of the highest claim rates under landlord cover. There can be many varying terms and conditions to cover this form of damage. As water damage can occur in so many ways, it is essential to get advice from an insurance broker. Additionally, there can be different excess amounts depending on the damage caused and how it occurred. This is indeed an important item to review and discuss.
- Storm damage – Finally, storm damage. Unfortunately storm damage can always impose a threat. Some landlord covers can have restrictions. Even exclusions on certain storm damage. Please discuss this further with your insurance adviser.
Without a doubt, landlord cover can protect you. You work hard to place yourself into a financial position to buy an investment property. Be sensible and consider ways to protect it too. If you require a referral to discuss landlord cover, please don’t hesitate to contact us.
If you’d like to learn more about property investment, our YouTube channel and Market Insights also provide a wealth of information to assist you with many areas relating to property.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
Jan 2018
