Why you should insure your investment property
It may be much safer than the stock market, but an investment property still comes with its own set of risks. These risks can be mitigated with quality landlord insurance, which will protect you against damage to the property and loss of income.
You might be tempted not to get landlord insurance because the costs will impact your return. And while it might seem like an easy way to cut down on expenditures, not spending that money to cover yourself could cost you significantly in the long run.
It protects you against defined events
A defined event is something that causes damage to your home or contents. Defined events may include such things as fire, theft and flooding. However, you will only be insured for the defined events that are listed in your policy.
There’s a low risk of any of these events occurring, but that’s not a logical reason not to take out insurance because your “it could never happen to me” attitude might see your investment go up in smoke.
Malicious, intentional or accidental damage
Damage will likely occur to your property at some point. The most probable cause is an accident. Landlord insurance can cover this type of damage, whether it’s caused by your tenants or yourself.
Despite screening methods, there will always be a small percentage of tenants that will have no respect for your property and will intentionally or maliciously cause damage to your property. The bill of this type of action is likely to greatly exceed “just an accident” so it’s good to be prepared. Some policies will also cover legal expenses if you need to take action against a tenant.
Loss of income
Leasing a property is a great way to earn a steady source of money each week. But there are circumstances where that can suddenly stop, including when a tenant:
- Breaks lease and leaves before fulfilling the terms of the agreement.
- Stops paying rent because they lost their job or had an accident or became sick.
- Won’t vacate the property or pay rent.
Insurance can cover scenarios where you incur a loss of income through no fault of your own.
Which policy is right for you?
Landlord insurance policies can vary wildly and it really pays to look closely at what it will and will not cover. At DT Property, we recommend EBM RentCover to our clients for:
- The speed in which claims are processed.
- The inclusion of pet damage coverage.
- The inclusion of 52 weeks rent loss cover with no excess.
However, landlords should do their own due diligence and research the market to find a policy that suits their particular needs.
We hope this has been a helpful guide on property insurance. If you would like to ask us a question, please drop us a line and we’ll do our best to help you out.