Owning an investment property is a smart way to build wealth, but many landlords make a critical mistake: assuming their strata insurance or tenant’s bond will protect them against significant damage.
The truth is, these forms of coverage are often inadequate, leaving landlords exposed to potentially thousands of dollars in costs.
A recent survey revealed more than 50% of landlords believe they are underinsured.
Of these, a further 30% admitted they wouldn’t be covered if they needed to claim for property damage or loss of rental income.
“Landlords who find themselves underinsured face significant financial impact as they will be required to contribute to the cost of repairs in the event of a claim,” says Carolyn Parrella, Head of Terri Scheer Customer Service.
This lack of adequate coverage is a serious oversight that could result in devastating financial consequences for property owners.
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Whether you’re a first timer, or a seasoned investor – read the policy document to make sure your asset is adequately covered. Picture: Getty
So why is this happening?
The misconception around strata insurance
Carolyn says one of the most common misconception landlords who own an apartment or unit in a strata building have is the belief that their property is totally covered by the strata insurance.
“Strata insurance is designed to cover the structure of the building and the common areas.”
“It does not cover landlord contents within their apartment (curtains, blinds, light fitting etc), nor does it cover public liability within the apartment,” she adds.
This may lead to a gap when it comes to internal damage within individual apartments – and without adequate landlord insurance, you’ll be left footing the bill for these kinds of damages.
The missing piece of the puzzle
Unlike strata insurance, which is limited to the building’s exterior and common areas, landlord insurance offers protection tailored to the risks of property investment.
Don’t get caught out thinking your strata insurance will cover you – a leaking tap falls to you. Picture: Getty
Carolyn says it fills the gaps left by strata insurance.
“Landlord insurance may protect the landlord for damage caused by tenants and may cover their liability for loss or damage to property owned by the tenant or to the tenant or their invited guests.”
“It’s important that landlords understand that landlord insurance does not provide cover for wear and tear.”
Terri Scheer landlord insurance, for example, covers both property damage caused by the tenant and loss of rental income—ensuring you’re protected from unexpected events such as malicious damage, accidental damage, or tenant default.
The hidden risks of being underinsured
Landlords who are underinsured—or worse, not insured at all—can face severe financial consequences.
Carolyn also says that without the right level of coverage, the cost of repairs, loss of rental income and potential legal fees, can quickly add up in the event of a claim – a tenant defaulting on rent, for example, and causing damage that exceed the bond amount.
“It’s important that landlords understand the rebuild value of their property and insure accordingly.”
Without accounting for these factors, landlords risk being caught short, especially if major repairs are required or the property is damaged beyond repair.
Ensuring you are fully insured not only protects your property but also your financial security.
Carolyn also stresses the importance of understanding what landlord insurance does not cover, like wear and tear.
“It is very important that the landlord pays attention to maintenance requests and the general repair of the property to avoid a claim being declined or reduced due to inaction by the landlord.”
How landlord insurance covers loss of rental income
One of the most critical benefits of landlord insurance is its ability to cover loss of rental income.
“Depending on the policy, landlord insurance may cover loss of rental income when the tenant defaults on the rent and vacates or is evicted owing rent,” Carolyn explains.
“If the property is damaged and untenantable while repairs are being completed, the policy may cover loss of rent. A landlord insurance policy may also provide loss of rent cover if a sole tenant unfortunately dies during the period of the tenancy.”
A loss of rental income can cripple landlords with extra costs – landlord insurance has you covered. Picture: Getty
In all of these cases, having the right landlord insurance in place can protect you from the financial strain of lost income while you prepare the property for new tenants.
Affordable protection for your investment
Many landlords worry that comprehensive insurance might be too expensive, but Terri Scheer landlord insurance is designed with affordability in mind.
“The annual premium could be less than the cost of one week’s rent depending on the type of policy you choose, and under current tax laws, is tax deductible,” Carolyn says.
“It is a very small price to pay for the peace of mind having cover provides.”
What first-time landlords should know
If you’re a first-time landlord, selecting the right insurance can feel overwhelming, but it doesn’t have to be.
Start by recognising that strata insurance is not enough to protect your individual property.
“Landlord insurance typically covers rent default and tenant damage but, generally, a separate building policy will be required to cover things like storm, flood and fire,” Carolyn explains.
A strata insurance policy may provide that cover for an apartment building, but a dedicated building policy should be considered for a house.
“Banks will generally require proof of this type of insurance at the time of loan application.”
How to mitigate risks as a first-time landlord
Landlords need to consider not just the physical protection of the property but also the financial risk mitigation that comes with being covered against tenants who might default on rent or cause significant damage.
If the time has come to rent out your beloved home and you’re becoming a landlord for the first time – Terri Scheer is here to help. Picture: Getty
“Be very clear around the risks you face and compare policies to ensure you are either going to be covered or are able to manage the financial impact if a claim occurs,” Carolyn advises.
“Look for policies that provide an all-inclusive type of cover for common risks landlords face, such as tenant damage, loss of rent, pet damage, and liability.”
By understanding the limitations of strata insurance and securing the right landlord insurance – like Terri Scheer – you can protect your property from the unexpected, ensuring your investment remains a valuable asset for years to come.
