Insurance dos and don’ts for landlords

Andrew Schaefer

Property investors who are paying off a bond on a rental property will usually also pay a monthly or annual premium for home owner’s insurance (HOC), which provides cover against damages caused by natural disasters.

But if you have a standard HOC policy, it may not actually cover you against any damages that oc- cur when the property’s occupied by a tenant. And it likely won’t cover you against the loss of rent if the property can’t be occupied after a disaster due to its damage.

If you’re a landlord, it’s worth your while to check the specific terms of your policy and to ensure that your insurer is aware that the property is let to tenants.

In addition, check whether there’s any provision in your policy preventing you from ever letting to a certain category of tenant, such as students.

Ensure that the sum insured stated in your policy represents the full replacement cost of the property and not its market value. The full replacement cost includes things like demolition, land clearing and architects’ fees, as well as construction costs.

Both property values and replacement costs rise over time and it’s your responsibility to ensure that your sum insured is in line with these changes. We always advise that owners maintain the HOC on the property – even after the bond’s paid off.

Obtaining the correct coverage could increase your premium, but paying a little more is certainly better than finding out after a disaster has struck that your cover is not valid.

Andrew Schaefer is MD of Trafalgar