Loss of Rent vs Rent Default cover for landlords
First, what is landlords insurance?
Landlords Insurance is designed to financially protect property owners and landlords from some of the most common risks associated with leasing a residential property, that aren't covered by home and contents insurance.
What's included in landlords insurance
Landlords insurance covers problems with tenants, loss of rental income and ensuring landlords aren't caught out if unexpected issues arise. The exact cover provided varies depending on the provider but in a nutshell it generally protects landlords from the following issues:
- Loss of rental income due to property damage from events such as a storm or fire.
- Rental default if tenants leave without paying outstanding rent.
- Fixtures and fittings cover in the case of malicious damage or theft.
- Compulsory landlord liability insurance, in case someone is injured on the property due to an issue raised by the tenants, but not addressed by the landlord.
Comprehensive policies can cover a single rental property or multiple units, such as in an apartment block or holiday complex. The level of cover required depends on the individual situation and needs of the landlord or property owner.
Loss of Rent and Rent Default - is there a difference?
Two of the key potential issues covered by landlords insurance are Loss of Rent and Rent Default. The definition of these issues are understandably sometimes confused, as the meanings and wording are similar. Below are explanations of each and what is covered.
Loss of rent cover
This covers for loss of rental income resulting from damage to the building. Loss of Rent covers you for lost rental income should your property become uninhabitable by the tenant due to fire, flood, serious building damage or other major issues with the property. It's important to ensure all these instances are included in your cover so it's possible to claim.
Rent default cover
Rent Default is where the tenant stops paying rent. This is understandably high on the list of landlords' concerns. In the majority of cases, payment default happens when the tenant's income is stopped or reduced due to an unforeseen event such as losing their job, sudden expenses, divorce, or illness. While choosing reliable responsible tenants is important, anyone can come under hard times unexpectedly and this cover-type insures for just that. The costs of repairing building damage or deliberate malicious damage left after tenants vacate a property would also be covered under rent default cover. If a property is simple left untidy or unclean or with minor damages then those expenses would generally come out of the bond. Rent default cover is specifically for more expensive and serious issues and costs which the tenant won't or can't pay for.
Should I choose Loss of Rent or Rent Default?
It is recommended that both Loss of Rent and Rent Default cover are included in any property owner or landlords' insurance policy, given such issues have the potential to be very costly and time consuming to resolve. Selecting adequate cover will protect landlords' income source so they don't miss out on rent if the worst happens, giving them peace of mind. For specific advice on on your insurance needs speak to a landlords insurance expert contact Transwest today.