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In this article, we'll explore the factors that affect insurance premiums, recap the importance of insurance, and offer practical solutions to help you minimise the impact. So, let's dive in and discover what you can do about rising insurance premiums.

What’s driving rising insurance premiums for property investors and tenants?

Various factors influence insurance premiums. Inflationary pressures, changes in the property market, the occurrence of natural disasters, and more frequent severe weather events all play a role in elevating risks and costs for insurance providers. As a result, both property investors and tenants bear the burden of these heightened risks and costs through rising premiums.

Tips for Property Investors

1. Consider Adjusting Your Insurance Excess

One way to mitigate rising insurance premiums is to increase your excess. By increasing the amount you're willing to pay out of pocket in the event of a claim, you might be able to secure lower premium rates. Think of adjusting your insurance excess like finding the right volume on a stereo system. Just like finding the perfect balance of sound, it allows you to strike the perfect balance between coverage and affordability. 

Here's an example of how different excess levels can affect the premium for three different properties:

• Property A

  • Sum Insured: $466,400
  • $550 Excess: $2,145.39
  • $800 Excess: $2,039.90
  • $1150 Excess: $1,969.58
  • $2500 Excess: $1,864.09

• Property B

  • Sum Insured: $264,000
  • $550 Excess: $1,399.73
  • $800 Excess: $1,343.31
  • $1150 Excess: $1,305.66
  • $2500 Excess: $1,249.22

• Property C

  • Sum Insured: $431,200
  • $550 Excess: $1,680.15
  • $800 Excess: $1,529.90
  • $1150 Excess: $1,486.82
  • $2500 Excess: $1,422.20

Does the thought of a higher excess send shivers down your spine? It's important to remember that in the case of rental property damage (with the exception of accidental damage), the excess is typically passed on to the tenant, minimising the impact on landlords.

2. Shop Around for the Best Insurance Options 

To ensure you're getting the best coverage at competitive rates, shop around and compare insurance quotes from reputable providers. Just as different paths lead to different destinations, every insurer offers unique coverage options and premium rates. By taking the time to shop around, you can be confident that you're getting the best coverage at competitive rates.

3. Seek Professional Guidance from an Insurance Broker

Having an experienced insurance broker on your side can make a big difference when dealing with rising insurance premiums. A broker can help you navigate the complexities of the insurance market, assess your specific needs, and negotiate competitive rates on your behalf. With their expertise and access to a wide range of insurers, they can provide tailored advice for your situation.

4. Proactive Risk Management

Insurance costs can also be reduced through proactive risk management. Regularly conducting property maintenance, addressing potential hazards, and implementing safety measures to prevent damage to your property demonstrates your commitment to risk mitigation. Insurers often view these efforts favourably, which may lead to more competitive premium rates. 

Additionally, proactive risk management reduces the likelihood of needing to make a claim in the future, leading to fewer insurance excess costs. It's a win-win situation in our opinion.

Tips for Tenants

1. Understand Your Responsibilities 

As a tenant, it's essential to understand your responsibilities regarding insurance. Whilst your landlord or property manager will typically handle insurance matters, you can contribute to risk mitigation by following safety guidelines, promptly reporting maintenance issues, and taking precautions to prevent damage to your rental property.  

2. Report Incidents and Damages Promptly

Promptly report any incidents or damages to your landlord or property management company. Documenting damages and providing accurate information helps facilitate the insurance claim process for a timely resolution. Open communication with your landlord or property manager is vital in addressing insurance-related concerns effectively. 

Remember, regardless of the cause or responsible party, report any necessary repairs to your landlord or property manager as soon as possible. Delaying maintenance can worsen damage, and the Residential Tenancies Amendment Act 2019 doesn’t protect tenants who fail to report damage promptly. This means the landlord could request that tenants contribute to the repair costs, even for accidental or fair wear and tear damage.

3. Consider Tenant Insurance

It's always better to be safe than sorry! Protecting your personal belongings and liability with tenant insurance provides priceless peace of mind. Tenant insurance covers your possessions and offers liability protection in case of unforeseen events. 

Remember, while a landlord's standard house insurance policy covers repairs or damage arising from accidental damage, burglaries, or natural disasters like severe weather events, it doesn’t cover tenants' personal belongings. That's where contents insurance, also known as renters insurance, comes in. Having your own contents insurance policy ensures your belongings are protected.

If in doubt, reach out to an insurance broker (it won't cost you a cent to do so!). They can help you find the most relevant and suitable insurance coverage for your needs as a tenant. By securing tenant insurance, you can safeguard your belongings and enjoy the comfort of knowing you're protected in unforeseen circumstances.

Why is insurance important? 

Insurance is vital for both landlords and tenants. As a property investor, insurance safeguards against risks such as fire, natural disasters, vandalism, and theft. With landlord-specific insurance policies like Initio Insurance, you also receive liability coverage that compensates for things like loss of rental income, methamphetamine contamination, and intentional damage caused by tenants. 

On the other hand, as a tenant, you greatly benefit from contents insurance. Contents insurance protects your belongings from theft, fire, or damage. Similar to landlord insurance, contents insurance for tenants often includes liability coverage, which protects you if someone gets injured while visiting their rented property and holds you responsible. This type of coverage helps with legal expenses and potential compensation claims. Having contents insurance gives you peace of mind, allowing you to enjoy your home without worrying about the financial implications of unexpected events. 

The bottom line…

Rising insurance premiums present challenges for property investors and tenants alike. By following the tips above and implementing proactive measures, you can navigate these changes effectively. Property investors can consider adjusting insurance excesses, shop around for competitive rates, and engage the services of an insurance broker. Tenants can seek to understand their responsibilities, report incidents promptly, and consider investing in contents insurance. By working together and staying informed, we can better manage the impact of rising insurance premiums on our investments and our wallets.