Landlords insurance for residential investment properties

Building cover can protect the residential structure and other permanent improvements included within the policy definition. The building sum insured should reflect the current cost of rebuilding the property rather than its market value.

A rebuild can involve demolition, debris removal, professional fees and current building requirements. How these costs are treated within the insurance differs between insurers, so the settlement basis and available additional benefits are worth checking.

Landlord contents can include items provided with the tenancy such as carpets, curtains, blinds, furniture and freestanding appliances, depending on how the policy defines building and contents.

Tenant-owned contents are generally not insured under the landlord's property cover. Furnished and part-furnished properties therefore need the landlord-owned contents to be considered separately.

These are often two separate covers responding to different problems.

Loss of rent generally relates to insured property damage that makes the rental property uninhabitable. Rent default relates to a tenant failing to pay rent, abandoning the property or being lawfully evicted in circumstances accepted by the policy.

Rent default cover commonly depends on tenancy records and the landlord following the required state or territory tenancy process. Available limits, payment periods, excesses and evidence requirements vary between insurers.

Tenant damage is treated differently between policies. Malicious or intentional damage may be covered, while accidental tenant damage may be limited to particular causes rather than general everyday damage.

Wear and tear, poor housekeeping and gradual deterioration are generally outside this type of cover. Theft by a tenant can also be treated separately and may require additional cover.

Tenancy records, inspection reports, photographs, police reports where relevant and available bond money can all become important when a claim occurs.

Landlords insurance may include legal liability cover for certain injury or property-damage claims arising from ownership or occupancy of the rental property.

Some insurers include liability within the policy while others offer it as an option, so it is worth confirming how it has been arranged.

For a strata-titled investment property, the owners corporation or body corporate generally arranges insurance for the building and common property.

The individual landlord may still need landlords insurance for exposures that sit with them as the lot owner, including landlord-owned contents or fixtures, rental-income risks, tenant-related exposures and liability, depending on the cover arranged.

The strata policy and landlords policy should be reviewed together because the division of cover can vary between strata schemes and insurers.