A standard landlord insurance policy can cover loss of rental income and damage to or theft of the contents of the home, although precisely what is covered can vary. Typical claims include losses due to rent arrears, water damage and malicious/accidental damage by a tenant.

Policies can also differ based on whether you’re managing your rental property personally or via a third party, and coverage can vary based on whether the home is being leased out as a short-term rental (such as via Airbnb) or as a long-term tenancy.

Make it a point to determine what you need and find the best possible insurance provider that offers a premium to fit your requirements. Insurance premiums vary across states and territories – for instance, in a cyclone-prone area like Northern Queensland the fees are higher to cover storm damage.

Landlord insurance is a valuable lifeline for investors, but of course that shouldn’t mean landlords can be lax about preventing bad tenants from being signed up in the first place. These nightmares can often be circumvented by conducting thorough background checks on potential renters.

You (or your property manager) should aim to speak to not only the most recent landlord but previous ones as well, in order to determine any behavioural patterns that could prove problematic in the long run. It also helps to ensure that their current landlord is not just trying to get a nightmare tenant off their hands. As much as possible, prod them to go into detail about what kind of tenant the person has been.

Bad tenants can make your life miserable for a time but don’t need to be allowed to destroy it, as you can avoid this by having the right protective measures in place.

These are the top 5 claims on landlord insurance, according to Terri Scheer:

•    Loss of rental income: This comprises more than half of all landlord insurance claims.
•    Malicious and accidental damage: This can range from claims for specific repairs to significant clean-ups.
•    Water damage: This involves damage to the property from leaky appliances or faulty plumbing. Note that not all premiums cover tenant-related water damage.
•    Storm damage: This is a major reason why properties are damaged in places like Queensland, which is prone to weather disasters.
•    Tenant death: Though morbid, this is a surprisingly common issue that landlords can be forced to grapple with.

This article is an extract from Your Investment Property written by Sarah Megginson 

Property Friends is a specialist Property Investment Advocacy that has been operating for the last 13 years on the basis of 3 principles: Trust, Community & Progress. www.propertyfriends.com.au (03) 9758 5331