Why is it important to have landlord home insurance?

Why is it important to have landlord home insurance?

After purchasing your property, you’ve decided to rent it out and use it as an income source. But what happens if your tenant stops payment or damages your property? Is there any way to protect your investment?

Yes, there is; with landlord home insurance you’re covered against loss of rental income, damage to your property and damage to any contents in the property that belongs to you.

Find the most suitable landlord home insurance policy for your needs by better understanding what it covers, what it doesn’t, and any other benefits.

What does landlord home insurance cover?

Renting out your home typically exposes you to three types of potential losses – loss of rental income, damage to the property and damage to its contents. Landlord home and contents insurance policies offer you protection across these three critical areas.

Loss of rental income

You could face a loss of rental income because of any of the following events and circumstances:

  • Non-paying tenant: Your tenant fails to pay rent over a period that triggers them to receive a termination notice, or their lease is terminated by court or tribunal order.
  • Tenant refusing to leave: Your tenant refuses to pay rent and doesn’t vacate your property even after they have been served with a court order.
  • Tenant financial difficulty: Your tenant is released from their lease obligations by a court due to financial hardship.
  • Missing tenant: Your tenant moves out without giving you notice or at the end of the lease with rent still owing.
  • Difficulty accessing property: Your tenant cannot access your property due to damage to surrounding properties.
  • Sudden death of a tenant: Your tenant passes away whilst still under lease.
  • Damaged property: Your property cannot legally be leased because of malicious damage by a previous tenant, or another insured event.

Damage to the property

If your property is damaged because of your tenant, their family, guests, or other insured event landlord home insurance will cover you. Landlord insurance will pay for the cost of repair or replacement for the following:

  • Unexpected loss or damage: Your property faces sudden and unexpected damage due to an accident of some sort.
  • Unexpected insured event: Your property gets damaged due to events such as fire, flood, storm and water damage.
  • Burglary: Any theft that has occurred as well as any damage to your property because of theft.
  • Pet damage: Your damage is caused by a domestic pet owned by the tenant and listed on the lease.
  • Deliberate damage: Your property is intentionally damaged without your consent.
  • Hateful damage: The damage to your property has been done with malice.
  • Burning: There is damage due to cigarettes, irons or pots and pans spoiling the carpet, benchtops or other parts of the property.

Damage to contents

Any damage to the contents that you own, or for which you are legally responsible, in your investment property are covered by home contents insurance for landlords. These contents include:

  • Portable household items
  • Electrical appliances
  • Curtains and blinds
  • Carpets and rugs
  • Manchester and linen
  • Above-ground pools
  • In case of a strata-titled building, contents also include temporary wall, floor and ceiling covers

What additional benefits do I get with landlord home insurance?

Besides the three coverage areas listed above, landlord home insurance covers you against a host of additional expenses. These include:

  • Legal costs: Any legal and representation expenses you incur while attempting to reduce your losses.
  • Sheriff/bailiff expenses: The cost of using a bailiff or sheriff to evict your tenant.
  • Legal liability protection: Your tenant or another party dies or is hurt at your property. Or if someone else’s property is damaged, and you’re held responsible or negligent in any way.
  • Removing tenant’s belongings: The cost of removing your tenant’s possessions after you’ve made an insurance claim for loss of rent.
  • Lock change: You need to replace the locks after your tenant has been evicted by court order.

How to choose the best home insurance for landlords?

Every insurer has different things that are covered and what isn’t under each landlord home insurance policy. To ensure that you find the one that suits your needs, keep these tips in mind:

  • Combined or building-only cover: If your property is fully furnished, you should include contents insurance. However, for an unfurnished property, you could go with a building-only cover. Just remember that curtains, internal blinds, carpets, and many other items are only covered by contents insurance. So a policy that provides combined building and contents cover might still be a better choice.
  • Cover while vacant: Find out if your cover is maintained if your property remains vacant for an extended period. To ensure the cover remains, you may have to prove you’re actively seeking a replacement tenant.
  • Look for pet damage: Ensure your landlord insurance policy includes damage caused by pets owned by tenants or their guests.
  • Do your research: Don’t rush into buying a policy. Research and make a landlord home insurance comparison to see which one works for you the best.

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Learn more about home insurance

Does home insurance cover tenant damage?

If you have a property that you rent out to tenants, you may ask, does home insurance cover tenant damage? Generally, as a landlord, you’ll require a different type of insurance policy than a regular home and contents insurance that offers coverage for the unique situations faced by landlords.

Landlord insurance

As a landlord, you must insure against additional risks to protect your investment. A landlord home and contents insurance policy covers loss due to natural disasters, storm, and fire. Generally, it also covers fixtures like stovetops, light fittings, window coverings, carpets, and ovens.

Additionally, you may protect yourself against any loss arising due to damage to your property caused by your tenants or their guests. Some landlord insurance policies may also protect you against financial loss due to unpaid rent.

Does homeowners insurance cover tenant damage? In most cases, regular homeowners’ insurance policy will not cover such damage. It’s always best to refer to the product disclosure statement (PDS) to clearly understand what is included and excluded from your home insurance policy.

What is home insurance?

For homeowners, home insurance can provide some financial protection to your property when things don’t go as planned. If you have home insurance and your property is damaged (or even the permanent fixtures inside), you could make a claim to your insurer to cover the costs of getting it fixed, replaced or rebuilt.

The idea behind property insurance is that you pay insurance providers to take on the risk of loss or damage to your property that you would otherwise be carrying. 

Is my home insurance covered for weather damage?

It is important to understand what is covered and what isn't covered in your home insurance policy before purchasing it. One crucial point to consider at the time of evaluating home insurance policies is whether it includes home insurance weather damage cover, and what it actually means if it does.

Typically, the protection afforded by home insurance actually depends on how the home was damaged or affected by conditions. The whole idea behind home insurance is to protect you from loss or damage against an unexpected, sudden event, like a fire or storm. If your home was in the way of a storm and your roof was damaged, which also caused internal water destruction, you may be covered for the damage to the roof and the property. The same holds true for walls or a fence that got damaged in a storm or flood.

However, you may not be covered if the damage occurred because your property was not well maintained and your home suffered a leak. A poorly maintained fence is less likely to be covered by home insurance.

Does homeowners insurance cover structural damage?

The most common causes of structural damage to a property include foundation issues such as settling or ground shifting, hidden structural damage, such as caused by termites, or weather-related damage, like by a tornado or hurricane.

If you’re wondering if structural damage is covered by homeowners insurance, you’re probably not going to like the answer. Most insurance providers don’t include structural damage in home insurance policies because they build the polices to offer protection from loss due to sudden, accidental events, such as fire, burglary or weather-related damage. It can take months or even years for you to discover most foundational or structural damage to your property, and by that time, they become rather costly to repair.

Since it takes a long time to detect, most structural damage is considered a maintenance issue and therefore, your home insurance policy won’t cover it. However, all is not lost. Once you locate the damage and take the necessary steps to not only repair it but also prevent further harm, your insurance policy might cover any subsequent loss. For example, if the foundation has cracks, and it lets water into your home, the water damage could be covered by insurance, but the cracks themselves would not be.

Is hail damage covered by home insurance?

If storms are among the incidents covered by your home insurance policy, hail damage protection is more than likely assured. While all policies differ based on your needs and what a home insurance provider will offer, some things are close to a certainty. 

Extreme weather events tend to be unpredictable in their severity, but dangerous all the same. You'll never be able to fully prepare for any damage caused, be it lightning, strong winds, rain leading to flooding, or hailstorms, but home insurance can at least provide you with a way to deal with life's unpredictable nature. 

If your home suffers from hail damage, you can file a claim with your insurer. In the event that this happens, remember to take pictures of any hail damage as an insurance adjuster will need to evaluate the impact on your home. Any additional wind damage to your roof will also need to be documented similarly.

You may want to check if your home insurance also covers hail damage to the cars parked on your property, and then file the claim for the total damage caused by the hailstorm. Once your claim is approved, your insurer should offer you either a cash settlement or refer you to a network vendor for the necessary repairs.

Does home insurance cover accidental damage?

Home insurance offers cover for any damage to your house and most policies cover the main building, garage, permanent attachments, and other external buildings that can be locked. 

Every insurance policy lists the defined events that will be covered, such as fires, floods, lightning strikes, theft, or falling trees. A few may also offer the option of accidental damage home insurance cover for other possible mishaps and unintentional damage around the home, such as when the dog knocks over the TV, or when red wine is spilled on the carpet.

The home insurance accidental damage cover is available only for the address provided at the time of buying the policy. 

Do I need legal cover on home insurance?

Besides protecting your home and your possessions from damage and theft, many home insurance policies also cover unfortunate accidents that sometimes result in legal action. This is called home insurance legal cover.

What does it cover?

This type of insurance cover protects you and your family members from liability if someone gets injured on your property. You can also get coverage for scenarios such as you or a family member accidentally injuring someone else outside your home or accidentally damaging someone else’s property. 

Typical liability claims include slips and falls in your home and the ensuing medical expenses, or falling trees or branches that cause  damage to your neighbour’s home or parked car.

Dog bites are another claim often covered. If your dog bites someone and you’re found liable, you’ll be covered for the vet and medical bills. Similarly, if your dog damages someone else’s property, home insurance legal cover will often take care of your liability.

Every member of your family is usually automatically included in home insurance legal cover provided they live with you.

What does home insurance cover?

What home insurance specifically covers and the extent of the coverage depends on the insurance provider and the individual policy. However, home insurance typically covers the property and other permanent structures found on or in the property, such as fences, in-ground swimming pools, garages, and dishwashers, to name a few.

There are usually two types of homeowner's insurance you can choose from, with "total replacement cover" or "sum-insured cover". 

If you’re not sure which option to take, it may be worthwhile to speak to a professional valuer to understand how much it might cost to rebuild your home and replace what's inside.

Can an insurer deny a lightning damage insurance claim?

Most Aussie insurance providers include lightning strikes among the incidents covered in their home and contents insurance policies. However, they’ll probably confirm whether you could have prevented the damage caused by the lightning strike before approving your lightning damage insurance claim.

For instance, lightning strikes may cause damage to appliances in your home and affect the working of your fridge or other appliances with a motor or compressor. If you have not purchased fusion damage cover, your lightning damage claim could be denied.

Also, if you live in an area where lightning storms are more likely to occur, but you did not take any steps to protect your home and appliances against potential lightning damage, your insurer may not accept your lightning damage insurance claim. This can include installing equipment to guard against electrical surges or maintaining the trees on your property to prevent damage to buildings from trees or branches felled by lightning. You should check with the insurance provider on the measures you can take to prevent lightning damage, before buying the policy.

Does homeowners insurance cover blown-down fences?

Most insurers consider fences a permanent fixture on your property. They are ranked alongside your home, garages or sheds, swimming pools, and solar panels when it comes to your home insurance policy. Your policy, therefore, covers your fences for the same incidents that cover your home or other parts of your property. For example, if there’s a major storm in your area and fences get blown down, you can get your insurer to pay for the cost of repairing the fence. You can check your insurer’s Product Disclosure Statement (PDS) to confirm that your policy covers the incident before filing a claim. Also, if the fence that has been damaged or blown down divides your property from your neighbour’s, you both may file a shared fence damage claim with your respective insurers. 

You should remember that there may be situations when your home insurance policy doesn’t cover damage to the fences on your property. Suppose you were working on or near the fence and cause some sort of damage to it you may not be able to claim compensation in this case.  Wear and tear on a wooden fence from water-logging near the fence, can be considered negligence on your part and your insurer may deny your claim.

Does home insurance cover tree root damage?

While trees can add much beauty to your property, they can be an indirect cause of damage to your home. For instance, a storm could knock branches off trees on to your roof or windows. A really strong storm may even cause the tree to topple entirely. 

Home insurance may not directly cover tree damage to your house. However, the policy will likely cover the incident, such as a storm, which resulted in branches or uprooted trees falling on your home. You can check your home insurance policy’s coverage for various incidents by reading the insurer’s Product Disclosure Statement (PDS).

You should remember that trees can require regular maintenance, just like the plumbing in our homes. Insurers may check whether the tree, its roots or its branches were rotting due to a lack of care, in which case the damage caused by the tree falling on your home may not be considered accidental damage. Again, if a branch falls on your house while you’re trimming it, you may not be able to claim compensation from your insurer for the damage. If any trees are growing too close to the walls of your home, consider checking that none of the branches or roots is causing any stress to your home, which can result in structural damage.

Type of home insurance do I need?

There are two types of house insurance policies, namely total replacement cover and sum insured cover. The former covers the total cost of rebuilding the house to the same standard before it was damaged. The latter home insurance type covers the cost of damages up to a predetermined limit, which is called the sum insured.

Different types of homeowners’ insurance may offer extra cover at an additional premium, including accidental damage, fire insurance, storm insurance, flood insurance, motor burnout insurance, home and contents insurance, and contents insurance. These extras are not classified as homeowners’ insurance types; include one or more based on your situation. 

Are bikes covered under home insurance?

Ordinarily, home insurance only covers damage to your house, which can include additional buildings such as garages, sheds, and fences, as well as permanent fixtures. 

However, to protect the items located in your home or in any of these other buildings, you will likely need to purchase home and contents insurance. Even so, your bike would only be covered if it does not require separate vehicle registration, as is the case for bicycles and 50cc minibikes, but not motorcycles, and only when located on your property, parked or otherwise. 

Depending on the cost of your bicycle or minibike, you can have it listed in your home and contents insurance as a high-value item. You'll want to check your insurer’s Product Disclosure Statement (PDS) to know the normal coverage limit for a bike included as part of your home and contents insurance, as well as the incidents which are covered. 

Insuring your bicycle can be distinct to insuring any personal effects on your bike at the time, or even using the bike when you're out and about. If you want to cover those, such as something in a basket or a camera equipped to the bicycle, or the bike itself as you travel, you will likely need to purchase additional personal effects insurance. You can also read about any additional coverage available under the personal effects policy, though for full coverage, an ideal option will likely be a separate bike insurance policy.

Can you transfer home insurance?

When you sell your home, you cannot transfer the home insurance policy to the new owner. The buyers need to purchase a new home insurance policy where the insurer will calculate the premium based on several factors.

The risk of any damage to the home is transferred to the new owners when you sell the property. You can speak to an experienced conveyancer or solicitor to find out more about when the risk gets passed to the buyers in your state or territory.

If you move to a new home

Can you transfer home insurance to a new property if you move to a new home?

Some insurers may allow you to transfer your policy to a new property as long as you meet certain conditions. These include informing the insurance company as soon as you enter into a contract to buy the new home. You may need to pay an additional premium when transferring your existing home insurance policy to the new property.