Building insurance is mandatory for you to secure a property investment loan. Landlord insurance isn’t mandatory but from my experience, it is a non-negotiable must have in the property investment trade to manage risk.
The insurance industry is HUGE. The variations in contractual terms and conditions are HUGE. Every insurer is hungry to get their hands on your premiums.
Back when I was still green in property investment, I got burnt taking out an insurance that simply wasn’t right because the inclusions covered were lame.
You’re not going to make the same mistake.
Here is what to look out for when considering which insurance offers the right level of coverage for your situation.
On the go? Here’s 30 seconds of key take outs:
- Choosing the right insurance is a critical decision that requires investing time to understand the terms and conditions, inclusions and exclusions. Ultimately, you’re insuring your lifestyle and that’s priceless!
- Even the remotest risk of a natural disaster or environment event needs adequate insurance cover.
- While building insurance is mandatory for you to secure a loan, landlord insurance is optional. From my experience, if you’re a property investor, landlord insurance is a must.
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As a property investor, having the right insurances in place is a must. At the very least you’ll need building insurance and landlord insurance.
Insurance policies are packed full of terms and conditions, and inclusions and exclusions for what is covered should you ever need to make a claim. When you’ve got goals your working hard towards, so you can live the lifestyle you want later, you need to protect your income producing asset every step of the way.
The first time you read through the fine print of an insurance policy, you’ll feel baffled. The use of multi-syllable legalese and ambiguous wording is enough to make you want to jump ship! Hang in there.
I’ve found the best way to shortlist insurance companies and policies is to ask an experienced property managing agent. They deal with property related insurance claims and will know from experience which insurance companies offer the best service and cover. In most cases, it will be your property managing agent who is chasing up any insurance claims on your behalf.
Here are the questions you need to ask about the conditions in which you can make an insurance claim.
Under what conditions can I make a claim for damaged contents?
At the very least, the inclusions you’re looking for should cover damage or loss due to:
- Fire or explosion
- Accidental, deliberate or malicious loss or damage
- Storm or rainwater
- Theft including damage due to theft
- Pet damage
- Glass breakage
- Oil leakage from any heater
- Electric motor burnout
- Riot or civil commotion
In regards to natural environment causes such as floods, storms, fires, earthquakes or lightning keep in mind that even the remotest of risk needs to be adequately covered. You don’t want to lose everything you’ve worked hard for because you decided that a once in a 200 year earthquake wouldn’t happen in your lifetime, and it did!
For both flood and fire cover, make sure to confirm the type of flood and fire you are covered for.
#StandEasyTip: Never, ever, ever invest in a flood prone area.
Under what conditions can I make a claim for loss of rental income?
At the very least, the inclusions you’re looking for should cover loss due to:
- accidental loss; deliberate; or malicious damage
- theft or damage due to theft
- pet damage
- a tenant:
- going AWOL (absconding)
- defaulting on rental payments
- failing to give vacant possession
- in hardship.
- the property:
- is unfit to live in (untenantable)
- is not able to be accessed
- At the very least, the inclusions you’re looking for should be covered.
What other expenses can I claim for?
Additional cover that you will be looking for in the insurance policy should include:
- Associated legal expenses
- Legal representation costs
- Bailiff or Sheriff fees
- Replacement of locks
- Re-letting expenses that exceed the tenant’s bond
- Removal of goods
- Tax audit costs
- Legal liability cover.
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