Landlord insurance - necessary?

Discussion in 'Property Management' started by Realist35, 14th Nov, 2021.

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  1. Realist35

    Realist35 Well-Known Member

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    Hi guys,

    My landlord insurance expired in May and I've never renewed it. I still have a current building insurance policy. I was just what your thoughts are on landlord insurance, whether you think it's necessary or not? What about building insurance?

    In my understanding, building insurance is really important (in case of serious building damage, e.g. earthquake, fire etc.) but I don't see much value in landlord insurance.

    Many thanks :)
     
  2. Joynz

    Joynz Well-Known Member

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    You might not care if you aren’t covered for rental loss or damage by tenants - and that’s fine.

    Your building insurance won’t generally cover you for damage or theft by tenants or their guests.

    Yes, you do need to have building insurance, at least - in case of fire etc. - unless you are happy paying 100% of the cost to rebuild.
     
    Last edited: 14th Nov, 2021
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  3. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Some people with large portfolios choose to self insure and save the money they would use on multiple landlord policies and use that money when a tenant defaults or damages their property.

    Myself? I wouldn't be without it. I have needed to claim on it numerous times due to tenants not paying rent or doing damage in excess of their bond.
     
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  4. Gen-Y

    Gen-Y Well-Known Member

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    It’s always when you run into trouble. Then you really wish your landlord insurance was there to take the heavy blow to your bottom line.

    The way I see it, that risk isn’t for me. As landlord insurance is part of doing business. It’s worth 2% cost to my bottom line. Hardly cry over it. :)
     
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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I am in a similar situation and my tenant hasn't paid for a month now and won't leave, or pay! I am worried that things are about to turn ugly and a person without assets will trash the place and I won't be able to recover anything.

    You only need it when you need it!
     
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  6. Beano

    Beano Well-Known Member

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    Insurance is a business which the company generally incurs overheads and still makes a profit from the premium.
    If you can handle/manage the risk then you can save this overhead and keep the profit.
     
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  7. Cousinit

    Cousinit Well-Known Member

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    I've looked carefully at landlords insurance and decided not to take it up. There are so many exclusions in the fine print I couldn't see much value. Since covid there are more exclusions too.
     
  8. Beano

    Beano Well-Known Member

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    It's a business .
    There has to many exclusions or there would be no profit to the insurance company.
    If you look at the insurance company accounts you will see many, many expenses.
    This all has to be covey by the premium you pay.
     
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  9. Scott No Mates

    Scott No Mates Well-Known Member

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    On CIP I've never bothered and only been caught short once. Personal guarantees & bond/bank guarantees are much more robust.

    On residential, where the risks are remarkably different and the bond is much lower, then it needs consideration.
     
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  10. Sackie

    Sackie Well-Known Member

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    It's a no brainer to me and forms part of my risk mitigation measures.
     
  11. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    I dont think LL insurance is worthwhile. Some basic building insurance is necessary. To get a loan now against a property the banks require you to be over insured. You are way way in front by investing funds instead of making other investors rich. if you took the other side and invested just 2k a year in insurer Steadfast for the last 5 years you would have 20K , at least you would have money to fix things the insurance doesnt cover. Never needed to make a claim in 30 years. Vaccancies are a non issue, the only late payer just needed the threat of his wages being garnished. Could build a new house with returns from alternative use of funds.
     
    Last edited: 14th Nov, 2021
  12. Joynz

    Joynz Well-Known Member

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    Build a new house for what you saved in not having landlord insurance alone?

    Or are you not taking out building insurance either?
     
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  13. thunderstrike888

    thunderstrike888 Well-Known Member

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    LL insurance is a complete waste of money in MANY instances.

    The excess you pay + the yearly cost is not worth it 9 or of 10 times. I did claim it once for damage but the insurance company took 3 weeks just to come out + another 2-3 weeks to repair.

    Its like $750 per year + excess. The bloody cost to fix all the stuff was only $2.5k and I could have arranged my own trades within 1-2 days to get it done. Plus rental loss during that period where the LL insurance wanted to keep 4 weeks of the rent anyway. (most are like this).

    Honestly after that experience LL insurance is not worth the paper its written on from many insurance companies. Everyone says Terry Sheer is good but their prices are exuberant especially for new policies. Plus during Covid many insurance companies were not even offering LLs insurance. I'm not sure if all the companies are now though.

    Anyway just be careful of it. Majority of time its a waste of money and you can attend things yourself much faster and cheaper. LL insurance for rental default is bullcrap as well. Most have caveats in there like they will want 4-6 weeks rent + must have a valid tenancy in place > 3 months + maximum payout time of like 6 months.

    The MAIN thing is buildings insurance. You need that in case of fire and storm damage/flood etc......
     
  14. Michael Mitchell

    Michael Mitchell Well-Known Member

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    You sound like someone who has been burnt by 2nd, 3rd, 4th tier insurers - AKA anyone but Terri Scheer or EBM pretty much, and yeah, IMO, those insurers aren't worth the paper they're written on, classic examples are loss of rent cover not starting till week 5 or 6 onwards as they assume/expect 100% of the bond would go to the first 4 weeks of unpaid rent - LOL, bond should never be used for unpaid rent, it's to cover damage and other stuff. Unpaid rent is a no brainer for tribunal order and insurance.

    In 5 years of managing other peoples properties - hundreds of tenancies, I've only had to do 11 claims, totaling nearly $30k, and every time has been a pleasure to deal with TSI. The only time my Landlords ever lost money in this space was when they were not insured with TSI or EBM.

    upload_2021-11-15_0-2-10.png

    Here's an example of all the different things they paid out for on one of my IP's when it got trashed by good tenants-turned-druggo's:

    upload_2021-11-15_0-5-43.png

    I 100% view landlord insurance as a cost of doing business and it should be factored into your calculations. Majority of the properties I manage the premium through TSI is less than $400 a year, some of the much larger than normal and expensive properties it might be double that - still an absolute pittance to pay for the peace of mind it gives. That might be a quarter or half a percent of the annual yield. Crazy not too IMO.
     
  15. Cousinit

    Cousinit Well-Known Member

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    Good post!
     
  16. willair

    willair Well-Known Member Premium Member

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    That's a excellent post,I would not be without landlord insurance it's just part of the business model and also realising the legal community understands how the chain of causality works on those who choose not to have the cover.
    I paid one yesterday as it's due 10 this morning..
    The price was $4128.50 ,it's in a flood zone and only one insurance company will insure that property.
    I lowered the rebuild costs back from 350k to 270k and the policy went down to just above 3-5 k ..
    When I read this post, some with over 10 properties and in the Logan area and the risk of personal injury claims and it only needs to happen once..
     
  17. Joynz

    Joynz Well-Known Member

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    Can you rebuild it for that?
     
  18. willair

    willair Well-Known Member Premium Member

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    Yes it's more possible then impossible if I went out and just picked up a removal house at next too nothing from developers who also save in demo costs and just pay a house removals company to reset the house on that property,as its wide Street high powerlines and opposite a large park and the power supply is set in the right location--even with all the permits from plumbing to electrical I would say yes..
     
  19. skater

    skater Well-Known Member

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    In the past, we've had a very large portfolio, but would never be without LL insurance. If you pick the right insurer, it's not that expensive, and the cover is amazing.

    Last year, we removed a tenant. We knew there would be issues, but were unprepared for the large hole in the dining room ceiling, and water damage in many rooms. This was not your classic tenant damage, just neglect, and how they were living in that house, I don't know.....although the tenant had punched many holes in walls as well as other damage.

    Between LL and Building insurance, we got a very large payout to repair everything. We had EBM on that property. No fuss, no hassle, just get the quotes and they paid everything out.

    We've had to claim on LL on several occasions. Even good tenants can turn bad, given the right circumstances.
     
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  20. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I actually agree - I just mentioned why some people might not
    I have all my properties with EBM and find their prices very reasonable as well
     
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