What insurance policies do property investors need?

| October 26, 2016

We all take out car or home insurance when we buy a new vehicle or house, but what about when we buy an investment property – what insurance should investors consider in this case?

insurance property

What insurances do I need now I have more than one mortgage?

Insurance should be a highly important part of your property investment finance strategy, as it can potentially save you a lot of money and stress, providing a safety net in the event of a major financial loss.

As a property investor, there are a number of different insurances you can obtain which can cover you in the event that you can’t make your mortgage repayments or your property suffers significant damage.

In addition to the building insurance on the investment properties you own, here are 3 types of insurance you should consider as a property investor.

Landlord protection insurance

The most important reason to obtain landlord protection insurance is to cover any loss of rent from an absconding tenant or from damage caused by a tenant. Landlord protection insurance policies will vary significantly but it should include public liability, worker’s compensation, landlord protection, building insurance and contents insurance. Some policies will include all these but others won’t, so make sure to check a policy thoroughly.

Income protection insurance

Given that many property investors use some of their work income to service their loans (in conjunction with their rental income), what happens if you were to suddenly fall ill or suffer an injury that stopped you from working? Income protection insurance can provide you with up to 75% of your annual income if you are unable to work because of illness or injury. Not only will it help to keep paying down your loans on your investment properties, but it will also help pay your weekly expenses and other bills.

Life insurance

Life insurance provides your family or other dependents with a lump sum of money in the event of your death. The amount of life insurance needed will depend on your situation, including your debt, assets and number of dependents. Life insurance is particularly prudent if you have a number of family members who are financially dependent on you, as it will assist to meet ongoing financial obligations.

If you can’t make your repayments on your investment loans and you don’t have an appropriate insurance policy in place, you may find yourself in significant financial distress.

However, if you’ve taken out the appropriate insurance policy then this can help you to keep your investment goals on track.

Bear in mind that these tips do not take account of your individual objectives, financial situation or needs. Before acting on this information you should consider its appropriateness, having regard to your objectives, financial situation and needs and seek professional advice. This information provide in this document is of a general nature only.

Author bio

Damian Collins is the founder and managing director of property investment consultancy Momentum Wealth. Offering market leading research and advice on the Australian property market, the company helps clients accelerate their wealth through property investment by assisting them in the strategic planning, financing, acquisition, management and development of their commercial and residential investment properties. Damian has completed a Bachelor of Business at RMIT University and a Graduate Diploma in Property at Curtin University. Damian is a board member of the Property Investment Professionals of Australia (PIPA) and is the Deputy President of the Real Estate Institute of Western Australia (REIWA).

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Category: home loans, Property

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