Homeowner’s insurance for landlords

Apart from paying off a bond on a rental property, property investors/landlords are usually also paying for homeowner’s insurance. What is homeowner’s insurance? Homeowner’s insurance covers the property owner against damages to the structure of the property. This damage could be caused by flooding, fire, wind, hail or other natural causes.

However, the above is not the case with all homeowner’s insurance policies. If you have a standard homeowner’s insurance policy, you might not be protected against any damages that occur while the property is occupied by a tenant or empty. Additionally, this policy might also not cover you for loss of rental income when the property cannot be occupied due to damages.

It’s important to take note of the terms of your policy. Most banks won’t approve a bond unless you have homeowner’s insurance, however, if you are a landlord, it would be wise to check the specific terms of your policy, as you need to ensure that your insurer is aware of the fact that your property is occupied by tenants and not by you, the owner. It’s also important to check if there are any provisions in your policy which prevent you from renting to a certain category, for example, students.

It’s also very important to check if the sum insured stated on your policy is the full replacement cost of the property, and not just its market value, as this could be higher or lower.

The correct coverage might be more expensive, however, paying a little more on your premium is better than finding out that your cover is not valid in the event of a disaster hitting your property. It’s important for new homeowners to know that they do not need to accept the homeowner’s insurance offered by their bank; they are entitled to shop around for the perfect insurance for their needs and requirements.

Keep in mind, you might not have as much flexibility if your property is situated in sectional title schemes because there will be only one homeowner’s insurance policy for the whole building or complex. The premium will have to be paid either annually or monthly by all the members of the body corporate.

Additionally, there are several other insurance matters for landlords to be aware of, which include household contents that belong to tenants that must be insured by them; the landlord is not responsible for any damage or theft of tenants’ possessions. However, if you are renting your property furnished, you will need to take out a separate household contents policy to cover the furniture and equipment that belong to you.

In conclusion, if you are renting your property, always make sure that you check your policy, to save yourself both time and money in the event of damage to your property.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)