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The Right Amount of Cover

Many property managers value the ‘peace of mind’ that comes with knowing their landlords are adequately insured. But with different insurances available, it can be difficult to know which types of policies are best suited to landlord needs. Carolyn Majda explains some of the different types of insurance cover available to your owners.

The right amount of cover

Many property managers value the ‘peace of mind’ that comes with knowing their landlords are adequately insured. But with different insurances available, it can be difficult to know which types of policies are best suited to landlord needs. Carolyn Majda explains some of the different types of insurance cover available to your owners.

As a property manager, your landlords may ask you for tips on choosing landlord insurance. It is vital that landlords understand the level of cover offered to them by insurances such as landlord and strata as well as standard building and contents policies.

When it comes to building, strata and landlord insurance, how do landlords find their way through the maze?

STRATA BUILDING AND CONTENTS INSURANCE

Standard building and contents insurance is primarily designed for owner occupiers and is the type of policy that most people have to cover their free-standing home and personal possessions.

A standard home and contents policy might offer insurance cover for the building when occupied by a tenant, but is unlikely to provide cover for many actions by the tenant that can result in financial loss for the landlord. As a result, it won’t often cover landlords for the specific risks associated with owning rental property. These risks can include malicious damage to the property by a tenant, various forms of accidental damage, loss of rental income as a result of property damage or a tenant absconding and legal liability for occurrences on the rented property that cause death or bodily injury.

Landlords will need specialised landlord insurance if they want to be covered for these types of risk.

STRATA INSURANCE

Forecasts from the Australian Bureau of Statistics show that within the next 25 years, strata-titled apartments are likely to become a more popular living choice than residential houses.

In a strata-titled apartment situation, strata insurance is held by the body corporate and paid for by owners’ levies. Under a strata title, the body corporate is legally responsible for insuring the buildings at the strata-title site, as well as the owners’ legal liability for common property areas.

This includes insuring the roofing, walls and the owners’ legal liability for shared walkways and common garden areas.

However, strata insurance usually doesn’t extend to cover the interior of individual units including internal wall coverings, curtains or removable flooring such as carpet or floating floors. This means that if a tenant damages the property or simply stops paying their rent, the landlord is very likely to be left out of pocket if they don’t have landlord insurance in place.

Confusion about the level of cover provided by strata insurance can leave landlords at risk of legal liability claims. If a tenant or visitor injures themselves in a common area of the strata title development such as a shared walkway, any subsequent legal liability claim should be handled by the strata insurer.

But if a tenant or visitor were to injure themselves while they are inside a rented apartment, it is the landlord who can be found liable. In order to be covered for legal liability inside the rented apartment, the landlord will ordinarily need a separate landlord insurance policy.

LANDLORD INSURANCE

Landlord insurance is specifically designed to cover landlords against actions by tenants. In the case of a stand-alone building, it can also cover the building itself.

Some of the specific risks that landlords face are malicious damage by a tenant, theft, accidental damage, legal liability (as landlords) and loss of rental income.

These risks are specific to landlords and unlikely to be covered by standard building and contents insurance or strata insurance policies.

Because of this, landlords should be aware of the availability of insurance policies that are specifically designed to address these needs.

It’s important to remember that even the best tenant can accidentally damage a property or suffer financial hardship that leaves them unable to pay the rent.

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