Why Landlord Insurance Matters
Renting your property can be a risky business, however landlord insurance can be a cost effective way to reduce your exposure and protect your investment.
‘Risk’ is a dirty word in the real estate industry, and for some property managers admitting that landlords take on a level of risk when renting out their property has most certainly not been part of their marketing spiel.
Truth be told, when a tenant moves into a property, there’s no real way of telling what the future holds. Despite a thorough vetting and selection process, there are some tenants who will cause damage, steal belongings, or leave without paying rent – leaving the landlord on the hook. While most tenants are perfectly reliable, trustworthy people who will treat the property well, putting strategies in place which mitigate the risks involved with renting a property is a no brainer.
In our experience, most landlords will choose to take out home and contents insurance. This combination of insurances usually covers damage that occurs to the building structure, as well as protecting the interior furnishings from theft and damage. Although this combination of home and contents insurance is a good idea for landlords, there are gaps which can cause significant financial loss. Many of these gaps are covered under a landlord insurance policy.
Loss of Rental Income
Landlord insurance can help pay for the loss of income when a property is rendered unliveable due to property damage, repairs being carried out or maintenance issues. Other situations could include the death of a tenant, if a tenant defaults on rent, or if a court frees your tenant from their lease obligations due to financial hardship.
Although most tenants will respect your property, there are some who will unfortunately deliberately damage property. This may include the tenants or their guests. In some cases, this may be covered by home and contents insurance, but you can get extra coverage from a landlord insurance policy.
Liabilities and Legals
Landlords have certain rights and responsibilities which must be upheld throughout the tenancy agreement. If a landlord fails to uphold their end of the bargain, the tenant may find grounds to sue. This could be the case if a tenant is injured due to negligence in the management of the property, as an example. In this case, the landlord insurance may help to cover the cost of settlement along with all legal and court fees.
A tenant may take their landlord to court on matters of liability, which means as a landlord, you may also be in need of legal assistance.
There are many different areas where landlord insurance provides valuable protection. This type of insurance is designed to be quite comprehensive and cover a broad range of issues that can befall a landlord. You can also protect yourself by engaging a property manager that conducts thorough screenings of all tenant applications, and ensures that you a legally sound lease agreement is signed by both parties. Property managers should perform regular inspections on the property throughout the lease agreement, and should communicate issues promptly with the landlord.
Although purchasing landlord insurance requires an added investment, we believe it’s worth it for the peace of mind of knowing your property is financially secure, and that you are covered. This can save you the time, money, and trouble in the long run should there be any damage or disputes.
DISCLAIMER: The information contained in this article is provided for general information purposes only. The information should not be used or relied on as a substitute for legal advice. If you require legal advice concerning a specific fact or situation, you should seek independent legal advice. MetroCity Realty accepts no liability or responsibility for any loss occurring as a result of anyone acting or refraining from acting on the basis of the information contained herein. Whilst MetroCity Realty has taken all reasonable measures to ensure that the information contained in this fact sheet is correct, MetroCity Realty gives no warranty and accepts no responsibility for the accuracy or the completeness of the information.