Why Landlord Insurance Is a Must-Have for Property Owners

We’ve all heard the horror stories…

“My uncle Jim had an investment property and he had some tenants who trashed the joint. That’s why I don’t invest.”
But we never hear the positive version.
“My uncle Jim had an investment property. Had some tenants who trashed the joint. But his landlord insurance covered that and now he has made $500,000 in equity and is positively geared. That’s why I wish I had invested.”

In Australia, we love to talk about why we shouldn’t do things. There’s always a distant cousin or friend of a friend who has had a negative experience.
That’s why only 1% of the population has 6 or more investment properties. We’d rather stick to what we know. Work a salaried job, use it to pay off our mortgage over 30 years and then retire with enough to scrape by.
But horror stories are horror stories for a reason. They are unusual and occur in exceptional circumstances.
The benefits of property investing outweigh the negatives by a long way. Yes, there are risks and setbacks, but these can be mitigated well by taking simple steps.

One of those is landlord insurance. So, why do we need it?

Protection against damage

Anyone who has owned property knows there are many ways that damage can be caused. And it’s often out of the control of both tenants and landlords. Whether it’s a burst pipe flooding the premises, or a kitchen fire sparked by an electrical fault, the cost of repairs can quickly escalate. The right landlord insurance will cover these and more.

Loss of income

Vacancy rates are at record lows around the country, so it’s hard to imagine an investment property spending any amount of time without a tenant. But market conditions can change quickly and there is also a risk that damage can cause your property to become uninhabitable.
In that case, time is money…as in, the more time your property is vacant, the more money you miss out on. Landlord insurance can also cover you for loss of income due to vacancy periods.

Faultless landlords

Liability protection will shield investors from legal responsibility for incidents that take place on your property. Australia is becoming increasingly litigious, and you don’t want to be held accountable for tenant injuries or property-related accidents. Otherwise, a single incident could wipe out any gains from your investment and possibly create further financial damage.

When tenants go bad

Most tenants are respectful and responsible people who are just looking for a place to call home, but those horror stories do exist for a reason. There are numerous ways tenants can threaten your assets and financial security.
Defaulting on rent payments has become an increasing problem with the cost of living on the rise, inflation surging and asking rents increasing considerably over recent years. Once a tenant falls behind on payments, you may encounter a lengthy process to find a resolution. During that period, the rent you are not being paid can add up to a significant amount.

Then there are the tenants who cause malicious damage to your property. The good news is that landlord insurance typically covers both of these costs.

It’s not too expensive.

Landlord cover is relatively affordable compared to other types of insurance like home and contents, or comprehensive car insurance.

Cover for standard investment properties can cost well below $1000 a year if you choose wisely. And it can cover damage that runs into the millions- up to $20 million for legal liability in some cases).
So it’s not only worth the peace of mind, but can be the difference between a successful wealth-building strategy that sets your family up for generations and financial ruin.

Speak to a Blink property manager today