GUIDES & RESOURCES

Landlord Insurance In The ACT

If you live in ACT and you’re a landlord, you may want to consider taking out landlord insurance.
landlord insurance ACT

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What is it and do you need it?

Landlord insurance is basically an insurance policy that protects you financially against the risks associated with renting out your property. It’s different to building insurance, which generally only covers you for damage to the structure of your property. Landlord insurance usually covers you for all your permanent fittings and fixtures as well as loss of rent in case your tenant defaults on payments.

However it’s important to remember that Landlord insurance and building insurance can be purchased as a single policy. You don’t necessarily need to purchase two separate policies. Combining them together may also help relieve the admin of managing different policies when it’s bill time.

What else does landlord insurance cover you for?

Every policy is different, so you want to carefully read over the fine print to understand exactly what you’re insured for. Here are some of the more common inclusions of a standard landlord insurance policy:

  • Missed rental payments
  • Damage caused by tenants (or their guests)
  • Theft by tenants (or their guests)
  • Loss of rent if the property becomes uninhabitable (due to fire or flood damage)
  • Lease break (when a tenant vacates the property before their lease expires)
  • Legal expenses associated with tenant disputes
  • Damage to fixtures and fittings by flood or fire

landlord insurance Canberra

How much does landlord insurance cost?

There are a few considerations that go into calculating the cost of your landlord insurance. Insurers will weigh up the risks associated with insuring your property, which may include location, the materials used to build it, local crime stats and natural disasters prone to the area.

The fees and costs associated with each policy tend to be packaged up differently, so it’s important you choose a structure that makes the most sense for your needs. For example, you may choose to opt for a lower excess (the amount you pay towards a claim) and higher premiums, or vice versa.

Obviously, the more expensive the policy, the greater the loss to your rental income. On the other hand, the cheapest policies don’t always provide the best value for money. It’s about getting suitable cover for your needs.

The good news is, because your property is an investment expense, your policy premium may be tax deductable1.

How necessary is landlord insurance?

Your ACT investment property is a financial asset you’ve worked hard to achieve, so it’s worth protecting. And if you’re taking out a loan, your bank may require you to take out landlord insurance as part of their approval process.

Things can and do go wrong when renting out properties to tenants. Fixtures and fittings can get damaged. Electrical faults can cause fires. Sometimes, tenants can hit financial hardship and struggle to make rental payments. If you’re relying on that rent to make your own loan repayments, you want to make sure you have financial protection.

Things to consider when choosing your ACT landlord insurance policy

When it comes to picking suitable cover, it’s about understanding the most common risks associated with your property. In Canberra, for example, there are large spaces of open woodland surrounding suburban areas, which create a greater risk for bushfires.

Here are some other things you might want to consider before taking out a policy:

Inclusions:

Consider common risks but also the specific risks associated with your property:

  • Natural hazards prone to the area
  • Specialised insurance requirements such as strata insurance (if your property is on a strata title), this may be sourced by your Body
  • Corporate or Property Manager.
  • Ensure the damage caused by pets is covered (in some states, tenants have a legal right to bring their pets with them)
  • Liability insurance (in case a tenant or visitor injures themselves on your property)

Accidental damage or malicious damage:

While most policies include losses for ‘damage’, many don’t include damage caused by accident or malicious means.

Excess (the amount you pay towards a claim):

While having a higher excess may reduce your premium costs, you have to pay more when it comes to claiming any losses. And if you have to make multiple claims, the costs can skyrocket.

Restrictions:

While you may be covered for loss of rent, for example, there may be limits to the amount you can claim or the length of time you can claim for.

Unfurnished or fully-furnished?

Most properties in Australia tend to be rented out unfurnished, but you’ll want to make sure your possessions are covered in the event you choose to rent your property out furnished.

Other resources

Before taking out landlord insurance, we recommend reviewing the ACT residential tenancy act so you understand your rights, your tenant’s rights and what’s expected of you as a landlord.

The ACT government has also released a Renting Book2 geared to help tenants, property owners and real estate agents understand their legal rights and obligations when entering a tenancy agreement.

Ready to choose a landlord insurance policy?

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Sources:
1. https://www.ato.gov.au/General/Property/Residential-rental-properties/Expenses-deductible-immediately---management,-maintenance,-interest/
2. https://www.revenue.act.gov.au/__data/assets/pdf_file/0008/1097333/The-Renting-Book.pdf

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