By Jamie Horner
“You only find out who is swimming naked, when the tide goes out” – Warren Buffett
We don’t think about insurance until we need it! Do you need building insurance or landlord insurance? Deciding on the type of insurance to take out would have to be one of the most important decisions a property owner has to make. Some landlords think they don’t need it, or it’s a luxury item, while others go with the cheapest provider and find out they’re not covered for everything. Some go with the most expensive provider and still don’t end up being covered for everything!
What are you covered for?
Don’t be fooled into thinking your building insurance will cover you as a landlord. As the name suggests, building insurance protects against damage to the property’s structure. But it often only provides cover for damage by some or all of the examples below:
- water damage (major water leaks)
- storm damage
- fallen trees
- vehicle collision
- civil unrest/rioting
Notice how damage caused by a tenant is not covered by building insurance? This would be the top reason why landlord insurance is the smart way to go. As a Property Manager actively dealing with properties that result in insurance claims, you want your landlord insurance cover to include the following additional covers:
- accidental damage caused by a tenant
- malicious damage caused by a tenant
- damage caused by pets
- theft by a tenant (building and/or contents)
Recently the Department of Commerce WA via Consumer Protection put a warning out to all Perth landlords, who have recently been targeted by cannabis and meth labs. For Owners, the result is loss of rent and massive clean-up bill to go along with your headache, with costs estimated above $38,000 for a meth lab clean up.
“We understand the gangs tend to set everything up very quickly and can harvest as soon as 3 months later”
Consumer Protection WA.
A comprehensive policy is essential
What if the tenant doesn’t do any damage but leaves before the end of the tenancy agreement, or their rent falls into arrears? Good landlord insurance will ensure you have little to no out of pocket expenses. When looking at what you want to be covered for, the following additional covers are recommended:
- rent arrears
- absconding tenants
- tenant hardship
- costs associated with tenants breaking lease
- loss of rent due to building damage
- legal/court costs
Too often I see owners left with out of pocket expenses after assuming they were covered for these issues by their landlord insurance. Ask your property manager for details of qualified and experienced insurance advisors who can assist you; it is often the property manager who is dealing with the insurers and we can send you product information from those that have helped our other property owners in the past.
But please remember the choice is yours and to read the fine print to ensure you really understand what you are and aren’t covered for. Spending a few more dollars a year could save you thousands in the future! I strongly recommend that you discuss your landlord insurance with a qualified and experienced insurance advisor or broker (ideally before you arrange your cover).
About the author
Need more information on this topic? Or can we help you with other property management questions? Feel free to call and speak to us at Empire Estate Agents on (08) 9262 0400 or email firstname.lastname@example.org.