Moving into the property market as an investor is a truly exciting chapter in your life. Building a real estate portfolio won’t only help you to loosen the burden on your month-to-month financial commitments, it’ll also help you to secure your financial freedom in the future.
However, it can also be risky, so it’s essential you have the right cover to ensure you’re protected in worst-case scenarios. Despite this, research has shown that although 20% of Australians own an investment property, only 40% of landlords actually carry comprehensive insurance to protect their asset.
From damage caused by tenants to force majeure, things can go wrong. Plumbing can break, pets can cause damage, or your property might be vacant for a long period of time, meaning you’re losing money. As a result, it’s key that if you’re moving into the property investment market, you ensure you’ve got the right insurance to keep you financially safe.
You’ll hear horror stories from investors about damage they’ve received to their property, such as fall-outs with partners who’ve gone on to cause 5 figures of property damage when they haven’t had the required insurance, or fire and floods that have seen them paying out of their own pocket to get the home back to a liveable state.
Regardless of whether it’s from a spouse, personal hardship or redundancy, tenants can also fall into trouble with their rent, which leaves landlords just as exposed.
On top of this, many landlords enter the market unaware of the strata law and that, if one of their tenants is injured on the property, they could be held responsible as a result of negligence.
Read the Fine Print on Your Insurance Agreement
Many landlords think they’re covered for these situations under bundled insurance or home loan policies, but you need to read the fine print to double-check for yourself. Although a policy might seem comprehensive, there are often certain details that are left out that could leave you exposed.
A truly comprehensive insurance policy will cover you for everything from fire, theft and damage to lack of rent payment, tax audits and drug labs.
Although the premiums on these insurance plans will vary based on your property type, you should expect to pay more than a dollar a day. Bear in mind that although this is optional, the costs you could be paying if you suffer from any of the above issues could mount up into the tens of thousands.
As a result, protecting yourself with the right insurance is the smart choice to make, as it’ll give you the peace of mind to fully enjoy the financial freedom you’re working towards.
The information and links provided on this website are for general information only and should not be taken as constituting professional advice. This information does not take into account the financial situation or particular needs of individual readers. Before making any decisions about matters discussed on this website, you should consider whether it is suitable for you in light of your own circumstances, and seek appropriate advice.