Do I really need landlord insurance?

If the tenants smash something its going to be covered by the bond.
If the whole place burns down it will be covered under building policy.

Unless its a high risk tenancy isn't it a waste of money?
How often do tenants realistically stay there paying no rent, refusing to move out.

Yes I am sure there are some horror story examples that can be brought up but what is the pragmatic approach?

Do you always get it? Get it depending on tenants? Don't bother?

 

It's useless until you need it.

 

@Whitecat

If the tenants do a lot of 'smashing' then will the bond cover it?

Are you a good driver? If you answered 'yes' then do you still have car insurance?

Do you have information on how many tenants stay at rental premises without paying rent? Do you really think it's a very rare event?

Is renting your property out totally risk free? Even with the best real estate agent, there is no guarantee that you will not be exposed to risk.

Even great tenancies with impeccable references and a fantastic track record can easily go off the rails due to a change of personal circumstances, a loss of employment, a relationship break up, health issues etc etc... Can you predict how your tenancy will go?

I think my above questions/comments have answered your questions.

 

It's (insurance) a business that has overheads and profit motive.
Of course (collectively) it is better to carry the risk (if you can accept the risk!)
As they say "the banker never loses"

 

LL insurance is intended to insure specific risks the owner doesnt want to bear personally. In return a excess applies and the insurer pays the balance. It mitigates risks. It does NOT eliminate risk. eg Three months of no rental income ? Eviction costs ? Property damage > bond.

Most bonds are completely inadequate. The tribunal will discount damaged items like carpets and allow maybe 50% (maybe !!). Once the bond is $0 you are incurring the costs yourslef. Just rubbish removal can come to $1K. Then add in wall damage and repairs a few $k on top. Repainting $4K. Carpets $2k. I often see tenant damages of $8K and without insurance the repairs will be slower. Lost rent then expands. Not uncommon to see vacant property for 4-6 months. At $400 a week that is a $10K loss of cashflow PLUS costs to repair.

Had a client a few week back whose unit was damaged by a neigbouring fire. (Some, water some charring on balcony and exterior) They have LL cover for all their contents and lost rent. Insurer is onto it fast as they want it fixed and occupied. UP TO 12months lost rent. The owner is actually happy as their unit will get a complete reno for the $350 excess.

Insurance costs $220-$400. (Varies with stand alone or strata)

 

You are absolutely mad not to factor landlords insurance into your cost of doing business re: rental properties...

The above are just some examples of claims paid out once the bond was exhausted

 

Do you mean "mad" not to factor or "mad" not to buy landlords insurance ?

 

My position on pretty much any insurance is that you're paying a tax for not being able to afford the risk of the insured event. With maybe an exception for private health cover.

In the case of tenancy liabilities, I can certainly afford the risk.

 

Paying $300 a year for a risk that could be $15K of savings is something even wealthy consider practical. But for someone owning 10 properties there is likely a risk of a single claim event not all 10. But if you had 10 propeties in Karratha then storm cover for all 10 may be needed as that single storm can be a wipe-out event. The net cost of LL insurance on strata property is approx $200 or less when the deduction benefit for the premium is considered. Most people have a self insurance "limit" they consider before they see benefits to a policy. Or should.

IMO its like travel insurance. You may lose a bag or a camera. Is that why you insure ? No. Usually its for the cost of the hospital in the USA or Europe etc that is the prime motivator maybe a car rental excess etc . You are really insuring worst case knowing the anecdotal stories are quite financially crippling. Its like reverse lotto. Paying $300 for a policy that could cover $1m of hospital bills is a bargain. You expect the odds of winning to be well against you but see the $1m of hospital costs as a financially crippling outcome.

Consideration to "could I afford that" is one of the decisions. For most people the answer may be "no" to the cost of complete reinstatement and lost income.

 

someone made a claim on LL insurance for $300? what is the excess?

 

I think those examples seem to indicate $10K PLUS claim value. For one excess. Maybe more. Its not uncommon to find multiple excess deductions however. This tends to occur with "ratbat condition reports" or exit reports. The insurer wont usually accept that a single event caused the ten holes in walls and six doors with holes each side. They may if a specific event occurred eg a break in, burglary etc

That $307 claim may have started as a much larger claim and been discounted down for disallowed item, depreciation etc

 

It's a no-brainer to me.

Get it.

 

I’ve never been able to claim it whenever I’ve needed it due to the property managers not filling in forms correctly.