Insuring Your Investment Property – What to Consider
Most forms of investment carry some degree of risk – and the rate of return on your investment is usually directly related to the risk involved. Few investments however offer the opportunity to insure yourself against the potential that your investment might be lost or damaged or even that your income might fall. Can you imagine getting insurance for your share portfolio that covers you in the event that the company fails or even that negligence causes your dividend to drop?
Aside from the many advantages that property investment can offer it also provides the chance to protect at least some part of your risk. Thanks to the different types of insurance available you can cover yourself against most eventualities, ensuring you and your property investment are protected against unforeseen circumstances.
There are a number of insurances you should consider as a property investor to ensure your investment portfolio is covered against risk.
Building insurance. As with your own home, standard building insurance will cover you for loss or damage to the property itself. As always it’s important to check the fine print on your policies to ensure you are covered for the events you think you need. If you own a unit your building insurance will normally be covered as part of your body corporate fees. Some policies will not cover for flood or earthquake damage and if you feel you are vulnerable to this it may be worth making sure you have sufficient cover even if it costs a few more dollars. It’s also worth paying to ensure you are covered for full replacement value in the event of loss.
Contents cover. Although the tenant will be responsible for their own possessions contents cover will ensure you are protected against damage to chattels and other fixtures within the property including floor coverings, drapes etc. Again paying for adequate cover is important and you should also be aware of any excess that you will be required to pay in the event of a claim.
Landlords cover. As a landlord your situation will differ greatly from a home owner. As such it’s important you investigate landlords insurance for your property. Landlord protection insurance offers a number of advantages specifically geared to the unique situation of having tenants. Firstly your landlord insurance will generally include a contents element to it which will negate the need to have a separate policy for your contents. Landlords cover also takes account of the fact that someone other than yourself is living in the property, a factor that would often revoke a traditional insurance policy.
Landlords insurance can cover you, not only for willful damage from your tenants, but for loss of income that may arise as a result of your property being un-rentable for an extended period of time. It can also cover you if the tenant fails to pay their rent, which is a reality that most landlords have to deal with at some point in time. Landlords insurance will normally include public liability insurance that will cover you in the event that your property causes injury or damage to another property or person, including the tenant.
Always check the fine print on your policy before going ahead with insurance. You need to ensure you adhere to all conditions that your policy requires (for example some policies may require you to use a professional manager for your property). You also need to check the terms of your mortgage agreement re the level and types of insurance that are required by your lender to protect their investment in your loan. Check with our team today to discuss the types of insurance your lender may expect from you.