Most landlords would agree that protecting their investment property with insurance is an absolute necessity, but a staggering number actually have the wrong insurance.
Figures from the Landlords’ Advisory Service reveal that 40 per cent of landlords do not have specialised landlord insurance, leaving themselves at risk financially.
Many landlords rely on a standard home and contents policy to protect their investment, little realising the following limitations of that cover when the property is rented out:
• Building insurance
Typically covers the bricks and mortar of the property (and fixtures), and is likely to cover events like fire or flooding.
• Contents insurance
Covers the policyholder’s belongings (e.g., carpets, curtains and furniture) in the property against damage and theft. It’s important for landlords and tenants to understand that the landlord’s insurance doesn’t cover the tenants’ possessions, so tenants need their own contents policy.
• Strata or body corporate insurance
Covers the physical building and common/shared property. This insurance does not cover the contents (which may also include fixtures and fittings) inside the apartment or unit.
Generally, none of these policy types will cover investors for damage or risks associated with renting out their properties. Without a specialised landlord cover, tenant damage (accidental or malicious) or theft of the owner’s property by the tenant, is not covered, and it’s only through specialist policies that cover for loss of rent is available.
At RentCover, around two-thirds of all landlord claims are for loss of rent. Take these two recent claims, for example:
After moving into an apartment in February this year, a tenant immediately fell into arrears. Many excuses were made for failing to pay the $1,275 p/w rent. The agent issued a termination notice, but the tenant refused to vacate. An application to VCAT saw the agent awarded possession of the property, but the tenant still refused to leave. In the end, a warrant of possession was obtained and the sheriff evicted the tenant. The policyholder was paid an $18,000 claim for lost rent.
The tenants of a $600 p/w Queensland house were forced to leave the property after the main sewer pipe blocked spewing sewerage into the home. Given the health risks, the property was immediately vacated and repairs were started to make the home habitable again. In addition to repair costs, the policyholder claimed $12,000 in rental losses.
Both claims show the value of landlords having cover that responds to tenant-related risks including loss of rent.
Sharon Fox-Slater is the managing director of RentCover, a division of EBM, which insures 120,000 investment properties around Australia. With over 20 years’ experience in landlord insurance, Sharon’s top priority is customer service and positive customer comments are her biggest marker of success. Despite leaving school at 15, Sharon has forged a ground-breaking career – she was the first woman to become a fellow of the National Insurance Brokers Association. Sharon was honoured to have been included in Insurance Business magazine’s Elite Brokers 2013 list.