Property investors who are still paying off a bond on a rental property will usually also be paying a monthly or annual premium for home owner’s insurance (HOC) which provides cover against damages to the structure that could be caused by flooding, fire, wind, hail or other natural disasters.
However, warns Andrew Schaefer, MD of leading national property management company Trafalgar*, if you have a standard HOC policy, it may not actually cover you against any damages that occur when the property is occupied by a tenant or standing empty.
“And it very likely won’t cover you against the loss of rental when the property cannot be occupied after a disaster because it has been too damaged.”
He says this may seem odd since most banks won’t grant a bond for your investment property unless you have HOC - but that if you are a landlord it’s really worth your while to check the specific terms of your policy yourself, and to make sure that your insurer is aware that the property is let to tenants and not owner-occupied.
“In addition, you need to check whether there is any provision in your policy preventing you from ever letting to a certain category of tenant, such as students, for example, or multiple single tenants, as in a commune.”