7 common landlord insurance myths
No matter how unlikely the event, accidents do happen, people do get injured and property does get damaged; this is why we take out insurance for our assets.
Insurance also helps cover costs associated with liability (legal responsibility) for damage or injury caused to a third party.
However, insurance can be complex and there are lots of misconceptions and myths.
Here we explore some of the common myths around landlord insurance:
- A specialist landlord policy isn’t necessary
An investment property is a business; you wouldn’t expect a household policy to cover a shop or an office building, and your tenanted property is no different.
There are different risks to consider.
Specialist landlord insurance providers cover a wide range of aspects not covered by normal house hold insurance such as damage by the tenant, or other tenant-related losses, such as rent.
- All policies are the same, so the cheapest policy is best
We all love a bargain, but remember, you pay for what you get. You need to consider your property, and the risk. You need to review inclusions, exclusions, limits, excesses and optional extras.
It’s also wise to look at the insurer’s reputation, consider its customer service, and how they manage claims and repairs. Ultimately, policy holders should base their decision on value and need, not just price.
Take a look at our blog post, What to look for in landlord insurance, if you need some guidance on what to consider.
- Landlords don’t need insurance when the property is unoccupied
This is a huge misconception. Accidents and incidents happen even when the property isn’t leased. Storm damage doesn’t hold back just because there isn’t a tenant in your property, and water leaks don’t wait until there is a tenant in your property before they decide to appear!
There needs to be insurance in place for when open viewings and maintenance takes place. The only time you should cancel your landlord insurance when you’ve sold your investment property.
- The insurance doesn’t cover you if there isn’t a tenant in the property
This ‘myth’ is in the same vein as the above one.
However, there are times when the property may not be covered, such as when the property is being renovated or for whatever reason, it is vacant/unoccupied for an extended period.
Because these types of scenarios present greater risks for the property (like damage), you will need to inform your insurer; they will advise whether you will be covered under your present policy, or whether you will need to pay for additional cover for that particular situation.
- The policy is transferable
When you move house, or sell a car, you don’t give your insurance to the new owners – they take out their own. The same goes for investment properties.
Insurance is a legally binding contract between you, the policy holder and the insurer. Noone else. If you no longer own the property, the insurance is void.
The two parties enter into an agreement and that agreement remains in place until the contract is cancelled or terminated. If the policy holder no longer owns the asset being insured, they cannot hold cover, and the insurance is ultimately void.
If the new owner wants insurance, they need to apply for their own policy.
- Landlord insurance covers tenants
Landlord insurance is to cover risks and losses for landlord, and items in the property owned by the landlord. It does not cover the tenant’s belongings except for very extenuating circumstances.
This needs to be made clear to the tenant, and they need to understand they will need their own insurance for their own belongings at the property and their own legal liability. For instance, if there is an unexpected storm or flood, and the tenant’s belongings are damaged, the tenant will not be able to claim for this damage off the landlord’s insurance policy.
The only situation a tenant may be covered by the landlord’s insurance is if the landlord was negligent in some way, and this caused the tenant’s loss.
- Insurers never pay out
Yes, they do. They pay out on genuine cases. While we cannot recommend an insurance company, we can certainly share with you which companies we see landlords get the best result with when they do have issues.
Do your own research. Look at reviews and before buying, read the PDS and consider whether it is right for you.
Our team is always keen to share its knowledge and help you on your property investment journey and ensure get the best out of your property. We’re always here for an informal chat to answer questions, so give us a ring on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or pop into our Cardiff office. For more property tips and ideas take a look at our Facebook page