During the recent floods across New South Wales and parts of South East Queensland, most of us were worried about our own safety as well as friends and family first and foremost.
However, many homeowners were rightly concerned about the potential damage to their properties, too.
Experiencing property damage is always a stressful scenario for anyone.
However, having the correct asset protection strategies can help to reduce the stress during a time of such heightened emotion.
Many homeowners and investors have the correct insurance premiums, but unfortunately quite a few also do not.
I’m not sure why that is the case when premiums are generally quite affordable and, for investors, can be claimed as a legitimate expense at tax-time.
So, here are four fundamentals that every property owner should have in their asset protection arsenal.
Building and contents insurance
For homeowners, it’s a no-brainer to have the correct building and contents insurance policies to protect your most valuable assets.
For owner occupiers of units and townhouses, building insurance is included in the body corporate or owners’ corporation fees.
However, it’s imperative for you to also have contents insurance to not only cover your personal belongings, but also to replace the internal features of a property, such as flooring, if the property was badly damaged by fire or flood.
Every property investor should have landlord insurance for each of their properties.
Landlord insurance is affordable, usually only about $300 per year, and is a tax-deductible expense.
Much more importantly than that, landlord insurance policies can cover investors for such things as loss of rental income; damage to contents, such as window coverings, by tenants, fire, flood, or storms; and damage to the building by tenants or their pets.
Policies also can include public liability cover.
It’s vital for every owner to consider the best ownership structures for their properties.
Many people simply opt to own property in their own personal names, because they don’t understand the other options that are out there that may suit their circumstances better.
For example, owning property in a trust can be a wise idea for business owners or people employed in occupations at high risk of litigation such as medical professionals.
Other reasons to consider whether owning property in a trust is right for you is for the tax efficiencies it can bring as well as protecting the asset to ensure it can be handed down to beneficiaries to help create generational wealth.
Income protection insurance
Many homeowners and investors also have income protection insurance.
This is especially important for self-employed people who might have a number of properties in their portfolios.
Income protection can provide cash flow to enable you to continue holding your portfolio in times of unexpected job loss or illness, for example.
No one wants to sell any of their properties under financial duress, so having insurance such as income protection can make the difference between continuing to hold for the long-term and selling because of cash flow problems.