Ask Margaret: What insurance policies do I need to cover my tenants?

Dear Margaret,

If I buy a property to rent out, what insurances do I need to cover me for the tenants etc?

Phillip, ACT 

Phillip, as you know the basic insurances are going to be really important for you, as with all property, so you need to start with a good house and contents policy. 

This means insuring the building, and any contents too.  Where it is rented you might not have a lot of contents but remember there are some things which still need covering, like window treatments and anything not part of the building. 

A lot of people think they don’t need to cover the building if it’s a strata-titled property, since the body corporate has building cover, but that’s not entirely true.  You will still need that gap insurance to cover parts of your property not considered common property - so anything inside your four walls.

In addition to that you will need landlords insurance.  This will cover:

• Damage caused by a tenant
• An amount for public liability
• Loss of rent if the damage renders your property uninhabitable
• The costs of pursuing a tenant through a tribunal for unpaid rent

It won’t cover loss of rent through periods of normal vacancy but that’s something you should be planning for before you buy anyway. 

It’s important to be aware that not all policies are the same – the important things you are looking for will be a low excess, and a high cap on claims for each event – many companies cap the claim you can make at too low an amount leaving you very out-of-pocket in the event of damage.

Shop around and don’t just take the cheapest option – a few dollars more might save you thousands in the long term and remember, the cost of this insurance is tax deductible.

Margaret Lomas is a best-selling author and writes and hosts the popular Property Success With Margaret Lomas and heads up the panel onYour Money, Your Call, both on Sky News. She is the founder of Destiny.

Have a property question? Ask Margaret!