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Tax time – review your landlord insurance
Insurance insights

Tax time – review your landlord insurance

28 Apr 2022 4 mins read

EOFY is approaching! While you’re preparing your paperwork it’s the perfect time to take stock and consider what financial arrangements will serve you best in the year ahead. That includes your landlord insurance cover.

This financial year, around 20 per cent of taxpayers (around 2.2 million people) will be including rental property income and deductions in their tax returns. If you’re one of them, you’ll need to find your landlord insurance paperwork.

Your tax agent will be able to give you the full run-down on what you can and can’t claim, along with what income you need to declare. In general, the cost of your landlord insurance premium is tax deductible. On the flip-side, if you received an insurance pay-out, such as compensation for property damage or lost rent, you may need to declare this as income. You’ll need the details for your tax return.

So with your insurance paperwork in front of you, why not take a few minutes to review your cover?

It’s always wise to periodically review your landlord insurance policy – if you ‘set and forget’ you may find your cover is no longer adequate for your needs.

To help make sure you have the right cover in place, ask yourself these three questions:

Do I have the right type of policy?

Owning and leasing an investment property comes with risks. Some of these are common among all property owners, like fire, storm or flood, accidental damage or theft. Other risks are unique to rentals, such as rent default or tenant damage. It’s those risks that usually aren’t covered by a standard home and contents policy. And it’s those tenant-related issues that account for around half of all claims landlords make on their insurance. So if you have a rental property, you need specialist landlord insurance.

TIP: There are some circumstances where landlord insurance is unlikely to be suitable. They include:

  • if the property is used for share/student accommodation or as a boarding/lodging house
  • if there are multiple leases for the one property
  • if the tenant operates a business from the premises
  • if a sub-letting arrangement is in place
  • if the property is vacant for an extended period.

A different type of policy will also be required if the property is not being used as a rental, for example, if you move in or have family members or friends live in it rent-free. Chat with your landlord insurance provider or your insurance broker about cover options.

Do I have the right landlord policy?

While it’s important to have a specialist landlord policy, it’s just as important to have the right type of cover. There are different types of landlord insurance policies to suit different letting situations. For example, there are policies for building and contents (suitable for detached houses), for contents only (strata properties) and for short-term rentals (including Airbnb) which protect against a range of insured events including flood, fire or storm damage and theft, tenant-related losses and legal liability. There are also policies which only cover insured events like fire and flood, and legal liability, but not tenant-related losses.

TIP: If you have changed the way the property is rented, for example switched from fixed-term leasing to providing short-term accommodation (including Airbnb) or gone from renting the property unfurnished to fully-furnished, it is best to review your cover and chat to your landlord insurance provider.  

Are the sums insured I’ve nominated adequate?

Landlords can find themselves inadvertently underinsured by not calculating and nominating the right sums insured. Whether you’re seeking cover for the building only, building and contents or contents only, you’ll need to work out what it would cost to replace your property if it was damaged or destroyed.

When it comes to the building, you need to make sure the sum nominated reflects current re-building costs. That is, what it would cost in today’s market to re-construct the building to the same level of finish, with the same features and to current building standards.

For contents, you need to calculate what it would cost to replace the goods you own at the rental (not your tenants’ possessions) on a new-for-old basis. Taking a room-by-room inventory of what you have at the property may prove useful in determining the sums insured – it could also be invaluable to have documented evidence of your contents (photos, video, receipts) if you need to make an insurance claim.

TIP: Don’t forget to factor in whether you have made any capital improvements – renovations, alterations, additions, modifications or extensions – to the rental that have affected its value. If you’ve upgraded or replaced fittings and fixtures, new replacement costs need to be calculated too. 

Once you have the answers to these questions, you’ll be able to ensure the landlord policy you have is right for you. If you need to make changes to your policy, or would like to explore cover options, be sure to get in touch with your insurance provider.

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions. 

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