Owning a rental business means being exposed to various risks, including natural disasters and problems with tenants. Thus, it is important that both landlords and property managers protect themselves by having a fully-insured rent roll.

According to the Real Estate Institute of New South Wales (REINSW), it is now a standard in the industry for property managers to discuss the financial risks a new landlord may encounter and to provide guidelines on how to handle these risks with a comprehensive landlords’ insurance policy.

"A good landlords’ insurance policy simply minimises risk for everyone. And it ultimately makes your job easier as it covers things like loss of rent, time spent at tribunals, legal expenses and any damage caused to the rental property," says REINSW Business Development Manager John Trani.

In addition, insurance offers public liability protection for both landlords and property managers. "If a tenant has a serious fall within a rental property, they may have grounds to make a negligence claim against the landlord. But what often happens if the landlord has no insurance, is the landlord's solicitor may try to counter-sue the property management company," says Trani.

Should landlords opt not to purchase insurance, property managers are required to document the transactions indicating that insurance was recommended either at the time of signing the management agreement or during the time the property is being supervised.

When landlords refuse to purchase insurance, professional indemnity insurance may protect the property manager, but it is safer for all parties involved if the property is covered with a good landlords’ insurance policy, including high levels of public liability.

REIWA reported that insurance also saves time and money for property managers and landlords.

Having landlords’ insurance when a repair is needed in the property makes the process easier for everyone. This will ease the losses in earnings and lessen the things the landlord has to do in order to restore the property.

Finally, landlords’ insurance will also help property managers if a tenant defaults on rent payments. If the landlord is not insured, the property manager or landlord may need to settle the problem in the local court, which is not only nerve-wracking but also time-consuming.

"Not only does your commission stop during the default period, but if the case ends up at the local court for debt recovery and the tenants are unable to pay a lump sum immediately, you could be chasing rent for years to come. With landlords’ insurance, once the claim is made and the funds are released, you’ll receive any outstanding commission. And you can also claim for your time representing the landlord through the policy," says Trani.