Imagine investing in a house or an apartment, only to find your tenant only pays the bond and a few weeks rent.
This wasÂ the caseÂ with a couple of âtoxic tenantsâ from Western Australia, with a history of signing a lease and then working the system by staying at a property but not paying rent for months.
As long as the bond has been properly registered, landlordâs insurance should respond in this situation and cover the rent during the period of non-payment, although this is an optional cover. In fact, landlordâs insurance is advisable for anyone who has an interest in an investment property.
âFor the policy to respond to a claim for rent default, there needs to be a proper lease in placeâ
âLandlordâs insurance provides cover if you own an investment property and you lease it out,â explains Michael White, Steadfastâs broker technical manager.Â It can cover the landlord if the tenant doesn’t pay the rent and for malicious damage caused by tenants. It can also include liability cover in case the tenant is injured in the property.
Policies can provide cover for loss of rent if the apartment is damaged and becomes uninhabitable, for instance from, a fire. Landlordâs insurance differs from strata insurance, which covers the building.
For the policy to respond to a claim for rent default, there needs to be a proper lease in place, says White, who has seen a wide range of claims against landlordâs insurance policies.
In one case, damage was caused to a leased property by a goat the tenants brought onto the premises. In another case, a tenant abandoned a property with 30 cats in it.
âTo reduce the risk of claims, ensure the property is properly managed. This includes carrying out regular inspections. This is not a set-and-forget asset â it requires ongoing management,â he advises.
While landlordâs insurance is not compulsory, itâs an important risk management tool for anyone with an investment property to help protect its income stream and pay for any damage done by the tenant or as a result of another insurable event such as fire.
So talk to your Steadfast broker to ensure you have the right insurance in place so that in the event of a claim, you should be properly covered.
Important note – the information provided here is general advice only and has been prepared without taking in account your objectives, financial situation or needs. Steadfast Group Ltd (ABN 98 073 659 677, AFSL 254928)
Important disclaimer – Steadfast Group Limited ABN 98 073 659 677, its subsidiaries and its associates.
The views expressed are those of the author only and do not necessarily reflect those of Steadfast.
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