Property Investment Tips: On Insurance

Property Investment Tips: On Insurance

Purchasing a property is the largest investment that most people will make in their life. Many people don’t protect this investment adequately with the right types of insurance.

In this article, we’ll share with you a number of your insurance options if you own an investment property.

1. Landlord insurance. This is probably the most common and most basic type of insurance you need if you own an investment property. Landlord insurance covers a comprehensive range of assets and events (depending on your cover), such as damage to the building as well as its contents. In addition, it may also cover damage caused by your tenants, as well as events where they default on their payments.

2. Building insurance. As the name would suggest, this is a type of insurance that is designed to cover the structure of the property. This may include the roof, walls, garage, pool, and other parts of the property. You may combine this with contents insurance, which we’ll discuss in the next item.

3. Contents insurance. This covers the things that are contained in your property. Examples of items that are covered are your clothing, appliances, and tools. If you want a more comprehensive coverage, you may also choose to get building and contents (also known as home and contents) insurance.

4. Income protection insurance. While technically not an insurance that covers your property, it could help you maintain your mortgage repayments in case you are unable to work due to an illness or injury. With income protection insurance, you’ll receive up to 75 per cent of your salary every month within the so-called benefit period, which typically lasts for up to two years. You could use a portion of your monthly benefits for your loan repayments.

At Rate Detective we specialise in Income Protection and can find you the most price competitive cover from our panel of lenders. Fill out the form on this page to take the first step in securing this quote.

5. Life insurance. This insurance could help prevent any financial burden on your family due to your debts (e.g. mortgage) in case of your death or if you’re diagnosed with a terminal illness. This insurance will provide your elected beneficiaries with a lump sum payment, which can be enough to pay off the remaining amount in your mortgage, among other things. Rate Detective also specialise in Life Insurance as well and can find you the most competitive price from our panel of lenders. 

6. LMI. Unlike the other types of insurance we discussed so far that benefit you, this is designed to benefit your lender and is a requirement of a loan if you don’t have a deposit for more than 20% of the loan with most lenders. The benefit will be paid out to the lender in case you default on your repayments. Because it costs several thousands of dollars, this type of insurance is best avoided by putting together enough deposit when taking out a loan. In some cases, the LMI may not be refundable.

7. Strata insurance. This type of insurance applies to units, townhouses, and other similar types of properties. This is compulsory, so if you own a unit, remember to factor in this cost when calculating the cost of ownership of the property. While the actual events covered depends on the policy, this typically covers public liability and cases of accidents in common areas of the property such as pools, lifts, and car parks.

Ready to Take Out a Mortgage?

Of course it all begins with the right type of mortgage for your needs. From construction loans to standard variable rate loans, the brokers at Rate Detective are ready to help you compare and choose the product that suits you best.

Also remember when comparing loans to use the comparison rate. This gives you the true cost of the loan because it already takes into consideration the loan’s most important aspects: the term, interest rate, and fees and charges that may be included.

This page has a comparison rate tool you can use when choosing loans. Simply enter the required details on the form and then click on the ‘Compare’ button. Try it out today!

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Published on June 6-th, 2014 in Property Investment
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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