INSURANCE URGED FOR INVESTORS
PROPERTY investors are being reminded about the often-underestimated value of specialised landlord insurance as protection against tenantrelated risk.
Jones Ballard Property Group new business manager Kayleen Eastman said insurance was one of the most important purchases for property investors.
“From an investment point of view, landlord insurance is a must,” she said.
“Unfortunately, many property investors have misgivings about landlord insurance that stems mostly from a lack of understanding about what it actually is, and how it differs from the coverage provided by their existing home insurance.”
Ms Eastman said home insurance and any landlord coverage in that policy could be vastly different to specialised landlord insurance.
“There is a common assumption that home insurance will adequately protect the landlord against costs incurred as a result of damage to the property, but the reality is that the cover built into your home insurance is limited in scope and may not offer the best protection for your asset.
“Unfortunately, many property investors learn this the hard way.”
Ms Eastman cited an example of how a landlord’s failure to secure specialised landlord insurance resulted in a costly exercise.
The property in question started out with consistent, good, long-term tenants who later began to demonstrate unexpected and dramatic changes in their behaviour.
“Across a two-year tenancy, they were model tenants but suddenly started missing payments and then unpredictably issuing bulk, late payments as well as failing inspections,” Ms Eastman said.
“Letters to the tenant and breach notices quickly became routine and when they stopped paying rent altogether and were asked to vacate, they refused, which resulted in bailiffs being called in to change the locks and evict them.
“Ultimately, this whole scenario resulted in a substantial loss in earnings for the landlord and a clean-up bill to repair damage to the property.
“The landlord’s home insurance policy did not cover any damages caused by the tenants’ children; all up the landlord was faced with a $9000 bill, with only $613.20 covered by their home insurance.”
Due to incidences such as this, Ms Eastman said Jones Ballard Property Group have highly recommended all their clients take out landlord insurance on top of whatever inclusions they already have under their home insurance.
In most cases, landlord insurance can be broken down to cover three major components: contents, which is different to the tenant’s contents and often includes carpets, light fittings, curtains and appliances; loss of income; and damage to the building.
“Like any form of insurance, there are many insurance policies on the market and homeowners need to find the right policy for their property,” Ms Eastman said.
“For what is really a minimal outlay of a few hundred dollars a year and generally affordable excess, landlords can be better equipped and better protected to handle anything that comes their way.”