GUIDES & RESOURCES

Landlord Insurance In South Australia

If you own an investment property in South Australia, odds are you want it to be a financial success. This could mean protecting yourself against the risks associated with renting your property out. Which brings us to landlord insurance.
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What is Landlord Insurance and why might you need it?

Many people get landlord insurance mixed up with building insurance, but they’re actually two very different things.

While building insurance generally covers any damage to the structure of your property, landlord insurance is more related to loss of income, damage, or theft brought about by tenants. It’s important to note however, that you don’t necessarily need to purchase these as two separate policies. Meaning that you can purchase landlord insurance, which also covers the building.

Some of the typical things covered by landlord insurance include:

  • Missed rental payments
  • Damage caused by tenants or their guests (be careful here, some policies don’t cover malicious damage)
  • Theft by tenants or their guests
  • Loss of rent if property becomes uninhabitable
  • Lease break (when a tenant vacates the property before their lease expires)
  • Legal expenses associated with tenant disputes
  • Flood damage to fixtures and fittings
  • Explosions

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Do you need landlord insurance and building insurance?

The short answer is, it depends. A number of things can go wrong with renting out a property, so you definitely want to make sure you’re covered. And while building insurance generally covers you for the structure of your property, what about all the bits and bobs you own inside?

Landlord insurance covers for damage to your permanent fittings and fixtures, such as carpets, blinds, appliances, light fittings etc. These contents are expensive to replace. Remember the Queensland and Victorian floods? Many of those investors didn’t have adequate insurance in place and faced immense clean-up and replacement costs.

And then of course you have the risk of a lost rent. Circumstances can change, and even the most reliable tenancy can hit financial problems.

How much does landlord insurance cost?

The cost of landlord insurance varies greatly between states and even suburbs. Insurers will weigh up the risks to them when drawing up a quote, including the crime rate of the location and whether your property falls within a natural disaster risk zone.

The more expensive your policy, the greater the cost to your rental income. On the other hand, the cheapest policies don’t always provide the best value for money. What you want to consider is what’s included in the cover, and whether you’re insured for the major risks associated with your individual property.

And because your property is an investment expense, your policy premium is tax deductible – a win, win all round1.

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Things to consider when choosing your landlord insurance policy

The truth is, landlord insurance is one of the most important purchases you’ll make as an investor. But policies vary in what they cover and how much they cost. So, it pays to make sure you’re covered for the things that are most relevant to your property.

Some of the things you want to compare, include:

Cost of premium:

This is the amount you pay for the insurance. Premiums vary and often reflect the risks to the insurer and the likelihood of you making a claim.

The excess:

If your excess is high, it could be the reason your premium is so competitive. The excess is the amount you pay towards a claim. The higher the excess, generally the lower the premium on your policy.

The policy inclusions:

Consider the risks associated with your individual property and make sure you choose a policy that includes those risks. For example:

  • Is your property on a strata title that requires specialised insurance?
  • Do your tenants have pets? (in which case, your policy needs to include damage caused by pets)
  • Think about the climate you live in and risks from natural disasters (South Australia tends to get very dry and hot during the warmer months and bushfires can be a serious risk)
  • Do you need liability insurance in case a tenant or guest is injured while visiting your property (by slipping on a wet surface, for example)?

Restrictions

Make sure you understand the finer details of your policy. While you may be covered for loss of rent, for instance, there may be limitations on the amount you can claim or the period you can claim for.

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