One Sunday afternoon, Dijana and I went over to the office to do some cleaning. When we arrived, it appeared as if someone had just been washing down the balcony area. Water was pooling on the balcony and running down the staircase. We didn’t think much of it. Then we opened up the office and stepped inside.
As we entered the office, we were greeted to an unexpected indoor water feature. Water was cascading down through a gap in the ceiling into the meeting room. The furniture and carpets underneath were saturated. As we moved further into the office, we could see water streaming down the side wall, onto the photocopier. At the back of the office, water was pouring down through a section of the roof onto the desk and furniture, and collecting on the carpeted floor.
The hot water system in the unit above had burst, causing ankle-deep flooding upstairs, which had only one way to go. Had we not decided to clean the office that day, the situation could have been much worse. Thankfully we caught the issue before it had caused too much damage. But nevertheless, when something like this happens, the last thought you want in your mind is, “how much is this going to cost me?”.
If you are ever faced with a similar situation, hopefully, your answer is, “just a small excess”.
So what has this got to do with me, you ask? We wanted to use this example to serve as a reminder of the importance of being insured. In the case of this article, we’re exploring the value of having landlord insurance, to protect your investment property.
Like any investment, rental properties have their own set of risks. Many of these, however, can be reduced if they are identified and strategies are put in place to minimise them.
Income from an investment property is reliant upon continuity of rental payments. Whilst there can be many causal factors, there is only one way to effectively transfer the risk, and that is with landlord insurance.
“Research shows one in five landlords who use professional property managers still don’t have landlord insurance.”
What does landlord insurance cover?
Among the most prolific policies on the market are EBM’s RentCoverUltra and RentCoverPlatinum (combined Building, contents and Landlord Insurance at heavily discounted prices), policies that currently protect tens of thousands of owners all over Australia.
The cover with RentCoverUltra is extensive, however, here are a few features:
- Up to 6 weeks if your tenant defaults on their rent or leaves without giving the correct notice
- Up to 6 weeks if your tenant is allowed by the courts to break their lease due to Hardship
- Up to 52 weeks if your tenant refuses to leave the property and denies you access
- Up to 52 weeks for Prevention of Access that is no fault of the owner or the tenant
- Nil excess on loss of rent claims
- Up to $30 million dollars of Legal Liability cover
- Up to $50,000 for tenant-related damage or theft by the tenant
- Up to $50,000 cover for defined events for “contents” which may include carpets, curtains, blinds or light fittings.
Features for defined events for contents include fire or explosion; storm or rainwater; lightning or thunderbolt; earthquake; impact; fusion; theft or malicious act by intruders; water damage by burst pipes or overflowing of fixed basins.
Now is the time to check the extent of insurance cover that you have on your investment property. Things to check are the extent of cover, does your policy include building, contents (in the case of a unit), legal liability, loss of rent and malicious damage?
It is also strongly recommended that insure your investment in the event of a natural disaster, storm damage, defaulting tenant or fire.Many investment unit owners are under the impression that the body corporate insures their unit. This is not the case. The body corporate insurance extends to common areas only, hence you should insure contents such as paint, window coverings and light fittings.
Irrespective of whether your investment property is a home or unit, townhouse or villa, we strongly suggest that your insurance cover includes building, legal liability of at least $20 million, loss of rent in the event of a rent default, and malicious damage at the end of a tenancy.
Let’s take a look at some previously lodged landlord insurance claims thanks to EBM Insurance. They tell the story of what can go wrong – anything from driving lessons to car fires.
“My tenant was teaching his wife to drive,” said one claimant. “As she pulled into the driveway, she hit the mailbox and, amongst the panic, she hit the accelerator. They went through the front doors of our rental property!”
The tenants couldn’t live in the property while repairs were being carried out. Luckily, the landlord had an EBM RentCoverPlatinum policy, which paid out more than $14,000 for the cost of home repairs and rent lost while the property was being fixed.
Another case involved a burglary. “Burglars smashed up the place. They ruined their (the tenants’) stuff as well as our carpets, curtains and blinds. They had to stay with a relative while the place was made liveable again.” A RentCoverUltra policy covered the damage and loss of rent.
A third was a fire. “Our tenants woke up one night to find the apartment full of smoke, but there wasn’t a fire. It turned out one of the cars in the basement car park was on fire and the smoke was filling our apartment. Extensive cleaning was needed to make it liveable again.”
Thanks to a RentCoverUltra policy, the clean-up, replacement of damaged items and loss of rent did not come out of the owner’s pocket.
RentCover Executive General Manager, Sharon Fox-Slater, said landlords could potentially lose the lot if sued after a death or serious injury.
“A professional property manager is vital in reducing the risks posed by tenants, but ‘stuff’ can still happen,” she said.
“An asset worth hundreds of thousands of dollars should be professionally managed and fully protected with insurance, but research shows one in five landlords who use professional property managers still don’t have landlord insurance,” Sharon said.
“Even the best of tenants can suffer circumstances beyond your control or, for that matter, beyond the tenants’ control. Many different everyday situations can lead to occasions where rental properties are damaged and untenantable,” she said.
For a modest premium, landlord insurance cover gives you peace of mind that your investment property is adequately insured. As your managing agent, we can assist you in effecting a landlord insurance policy that suits your needs.
So if ever you find yourself up the proverbial stream with regards to your investment property, hopefully, you can say, “it’s just a small excess”.