New year policy review – a good resolution

A fresh year means a fresh perspective. So it’s an ideal time to review your landlord cover to ensure it still meets your needs.

In January, many people are of a mind to make resolutions, plan for the year ahead and get organising.

Top of mind is often sorting out financial matters – such as reviewing the value of contracts for everything from streaming services to gas supply. So while you’re checking to see that you’re getting the best deal on things around your home, it might also be a good idea to consider your investment property too – and whether your assets are properly protected for a new year. That means taking a squiz at your landlord insurance policy to make sure your risks are well covered.

How should you go about reviewing your landlord insurance? We’ve got some tips:

Ask yourself if you still need landlord insurance

This might sound like a strange question to ask yourself but, if things have changed at your rental, then you may no longer need specialist landlord insurance.

Landlord insurance is designed to cover owners of rentals (investment properties) against financial losses that stem from a range of insurable events. It’s specialist property insurance that covers a specific market segment. The cover is only suitable for people who own a residential property that is leased or available for rent.

Landlord insurance may have been appropriate when you took out/last renewed cover, but circumstances may have changed. Here are a few scenarios which might apply, and warrant a change to your insurance arrangements:

• you no longer own the property (you sold it)
• the property is no longer rented or available for rent  
• the property is now your primary place of residence
• you are only using your primary residence for occasional Airbnb bookings
• the property is now used for some types of student or share accommodation with multiple leases on the one property
• the property is now being run as a boarding, lodging or guest (B&B) house
• the property is being left vacant
• the property is in the process of being renovated
• you are letting family or friends stay at the property free of charge
• there is no lease agreement for the rental
• a subletting arrangement is in place
• the premises are being used for business purposes.

If any of these scenarios are in play, you may want to engage an insurance broker (like our colleagues at EBM Insurance & Risk) to help you source the right type of insurance for your property.

Check that you have the right sort of policy for the type of property

The type of property you have isn’t going to have changed (unless you subdivided and built other dwellings on the site or something similar) but it always pays to double check your policy to make sure you’ve taken out the right cover – mistakes happen and it’s the policyholder’s responsibility to make sure they have the right policy.

There are policies designed for detached houses (which cover the building) and ones for other types of dwellings like apartments, units, flats, villas, townhouses and studios (which don’t cover the building structure, because it’s covered through strata insurance). If you take out the wrong type of policy, you could be paying for cover you don’t need or find you aren’t properly insured at all.

Check that you have the right policy for the letting scenario

This is something that may well have changed since you took out, or renewed, your policy. If you have switched the way you rent the property, for example have moved from fixed-term to short-term, then you need to switch the type of policy too.

Different letting scenarios have different risks, so there are different policies. There are policies designed to cover the risks of standard leasing, ones specific to the short-term market and ones that offer select cover.

Be sure to also have a policy that covers the property’s contents – you need different levels of cover for fully-furnished and unfurnished rentals, or for contents you own at the premises when offering a standard lease versus if you rent the property short-term.

If the way you are leasing your rental has changed, chat to your landlord insurance provider about the right cover.

Make sure the policy covers your current risks

Once you’ve checked that you have the right policy in terms of the property type and how you lease it, it’s imperative that you make sure it will cover the risks you face.

Be realistic and consider what risks there could be at your investment property. This should include physical risks (such as damage caused by things like severe weather, tenants, theft, impact) and financial risks (like loss of rent, public liability and legal expenses). Don’t fall into the trap of thinking ‘it’ll never happen’ – every year we have thousands of landlords lodge claims for things they didn’t expect to happen, or simply hadn’t imagined.

Not all landlord insurance policies cover the same risks. For example, some policies don’t automatically include cover for accidental, malicious, intentional or pet damage – some don’t offer the cover at all or only offer it as an add-on. You may also be surprised to hear that some insurers also don’t automatically include loss of rent cover. Given it’s the number one reason landlords need to make a claim, you might have assumed the cover would be a given, but you could be mistaken.

One area where you need to be sure you have cover is for weather-related events. While any property can suffer damage because of severe weather, some properties are at greater risk – for example they may be in a high-risk bushfire zone, flood zone, a cyclone area, or they may be located close to the sea. Be sure that the policy covers the weather-related risks your rental faces. Never take for granted that the property will be covered for fire, storm, cyclone damage or flooding – these may be cover exclusions, subject to restrictions, only available as an insurance add-on, or not offered by the insurer at all. Too many owners find out the hard way that they are not covered for damage caused by the wrath of Mother Nature (in particular, cyclones and flooding) until it comes time to claim, after a disaster has struck.

The bottom line is, you need to make sure that the policy you buy meets your needs. Neither your real estate agent nor your insurer is responsible for making sure you have the right cover – it’s up to you. Seek good advice, understand your risks and look at whether the policy covers those exposures.

Carefully check the details of the policy

Admittedly, insurance paperwork isn’t exactly scintillating reading, but it’s important reading. You need to understand your policy – it’s inclusions and exclusions, limits of cover, and terms and conditions. It’s especially important that you carefully read any paperwork your insurer sends you about updates to terms and conditions to make sure you understand how these could affect your cover.

It’s also a good idea to make sure you check the sums insured you nominated, and the maximum amounts the insurer will pay where sums insured aren’t nominated. If you’ve nominated insured sums, check that these are still adequate – the costs of building and replacing contents is ever-increasing and you don’t want to find yourself underinsured.

Checking that the maximum payout that the insurer will provide is enough to cover potential losses is also a good idea. Check things like the maximum weekly rent (especially important if you own prestige property or may have increased the rent above the maximum threshold) and the maximum payout for fire, water, accidental, malicious or pet damage (assuming your policy covers these).

When it comes to insurance, ‘set and forget’ is not a recommended strategy. You need to protect your valuable asset and make sure that the cover on your investment property actually covers you for the risks at your rental. Start the new year by giving your landlord insurance policy a thorough once-over and get in touch with your insurance provider if you have any questions or need to make changes. 

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.