If you are a new home buyer looking to secure your first investment property against unexpected events, then all you need is a good home and contents insurance policy. This policy will come in handy whether you’re purchasing a home or rental property. In case of significant property damage, all your loss gets covered.
If you are unfamiliar with all of this, we have you covered with this guide on investor property insurance and our awesome section on property financing.
We’ll look at several insurance policies that protect your investment property in the event of significant damage; your property insurance policy claim will be reimbursed in cash value or repair costs.
What is landlord insurance?
Landlord insurance policies, also known as rental property insurance, are policies that cover property investors against risks associated with owning rental property. Having public liability insurance for your rental property before renting it out is a smart idea for any rental property.
The landlord insurance policy will cover you against risks such as theft, loss of rental income, and property damage. It also has some extra options like legal cover, accidental damages, and emergency assistance that you can include in your policy.
You’ll have to cover some legal expenses, but it’ll be well worth it.
Types of property insurance
When you are investing in property, it’s better to be safer than sorry. So, you need to ensure that you find the best property insurance policy from the right insurance company. There are several types of property insurance policies and they include:
1. Vacant property insurance
Your homeowners’ insurance policy does not provide coverage for rental properties that are vacant due to renovations, a tenant move-out, or because there are no prospective tenants at the time.
Vacant property insurance will ensure that you’re in a better position should there be any damages when the property is vacant as unoccupied places are more vulnerable to damages from theft, fire, and vandalism among other things.
2. Homeowners insurance
This is a home and contents policy that covers you against natural and man-made damages such as fire, theft, and floods among others. The damages have to be on the structure of your home such as the garage, main house, or the shed and personal belongings.
As there are numerous coverage options under the homeowner insurance policy, you can choose a couple to start with depending on your type of investment property. Different homeowners’ insurance policies offer varied levels of coverage. For the best coverage, you’ll have to opt for an expensive policy for premiums.
3. Renters insurance
This is a contents coverage, not a building policy, thus it solely covers the possessions of your tenants. Though it’s not a legal requirement, it does help you and your tenants live in peace. If as a tenant you get displaced by an incident that’s covered in your policy, you can file for a claim and get reimbursed.
For example, if the living room in your rental catches fire, the property insurance coverage will only cover things you own such as furniture, but not the room’s repairs. Ensure you understand what’s covered in your renter’s insurance policy before committing.
How does property insurance work?
Property insurance provides coverage for your personal property against risks such as natural disasters, fires, theft, and other damages to your property’s structure. This policy is offered by insurance companies and purchased by homeowners and renters.
The monthly premiums for the policy coverage will depend on several risk factors such as the value of your home, neighbourhood, and state. Insurance companies will charge more for homes in the suburbs of Sydney as compared to other remote states.
It’s a multipart policy that depends on what you’re interested in. As the homeowner, you can opt to insure your home’s interior, exterior, or both. On the other hand, tenants can only get contents insurance. The cover gets you a cash value reimbursement or the replacement cost of any damaged property.
When looking for the best property insurance policy, take your time as most policies don’t cover damages caused by tsunamis, mould, and sewer backups among other extreme events. Also, go for ones that offer liability coverage for bodily injuries, guest medical expenses, and tenant-related risks.
How to acquire property insurance
Finding the ideal policy for your situation will require some research on your part, though you can look for an insurance broker to handle this for you. There are several factors that you’ll need to consider when looking to take out an insurance policy on your property. They include:
1. Type of property insurance
First, you need to go through insurance policies to identify the best one. This will be determined by whether you own the property or are just renting. It also depends on the type of home such as a condo, mobile home, or townhouse).
2. Choosing coverage
You should insure your valuables against fire, theft, and natural disasters like floods and earthquakes.
3. Comparing insurers
Next, you should get quotes for your cover from several insurance companies and see where you can get better terms in regards to discounts and deductibles.
4. Taking a policy
Finally, pick the company with a policy that best suits your needs. The coverage should be capable of repairing/replacing any valuables and damages to your property.
Conclusion: investor property insurance: what you need to know
Though you’re not required by the law to get some of these insurance policies, they can be very helpful in case of disasters.
- Whether you get reimbursed the cash value or the replacement cost for the damages, you get to overcome risks that might have ruined you financially without a property insurance policy as a property owner.
- To ensure that your investment property is able to generate money, you need to take precautions first and take a building and contents insurance policy.
Don’t wait for disaster to strike before you decide to insure; the right insurance can save a lot of time, money, and headaches.
