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Landlord Insurance

Discussion in 'General Property Chat' started by LaoBan, 21st Apr, 2016.

  1. LaoBan

    LaoBan Active Member

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    Hi all,

    Getting investment property soon (first one), do I need to get landlord insurance?
    The property is a townhouse currently rented.

    As far as I know, body corporate already includes the building and other insurance for townhouses (?).
    And to cover rental loss, need to add extra cover anyway?

    If landlord insurance needed, which one(s) are good?

    TIA
     
  2. Nick Valsamis

    Nick Valsamis Real Estate Professional

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    You do not need landlord insurance but it is highly recommended that you have it.

    The cost will also be small, and likely to be less than a weeks rent but it will cover you for rent defaults and damage by the tenant.

    EBM and Terri Scheer are both good choices. You can even receive a discount by quoting "PropertyChat" when you sign up with EBM for landlord insurance.
     
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  3. Jerry O

    Jerry O Well-Known Member Premium Member

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    I would get a landlord insurance if I were you. gives you better sleep at night. ;)
    As mentioned by Nick. EBM and TS are popular choices.
     
  4. Mac Fields

    Mac Fields Well-Known Member

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    I had an apartment IP that had a fire in it. LL insurance paid for repairing everything inside, as well as loss of rent. Body Corporate insurance didn't really pay for anything.
     
  5. Yson

    Yson Well-Known Member

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    how different is the EBM as compared to those offer by Big 4 banks?
     
  6. sash

    sash Well-Known Member

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    They don't flood (i.e. water from natural or man made sources).

    Westpac or NRMA is good for flood cover.
     
  7. Xenia

    Xenia Adelaide Property Manager Business Member

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    Definitely need landlord insurance, have a chat to Brett from this forum about EBM
     
  8. Lollie

    Lollie Active Member

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    I wouldn't bother with landlords insurance unless your property is in a low-socio area. Your focus needs to be on learning to understand what a good property manager is and how to find one.
     
  9. Nick Valsamis

    Nick Valsamis Real Estate Professional

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    That would be a calculated risk. But imagine if your tenant accidentally set the kitchen on fire which then required a full replacement and internal painting. Then you would wish you had insurance.

    Also, it is hard for most people to be able to differentiate between a good and decent property manager unless they have dealt with many different property managers as benchmarks or have worked in the industry themselves.
     
  10. sash

    sash Well-Known Member

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    Wow...huge risk there.....what about liability?

    Property managers come and go..
     
  11. Nick Valsamis

    Nick Valsamis Real Estate Professional

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    Yes true, that's a more important reason to have landlord insurance.
     
  12. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Definitely get it. For my experience its a type of insurance I have been much more likely to claim on than for a typical policy. And it doesn't cost that much.
     
  13. S1mon

    S1mon Well-Known Member

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    i dont mind a bit of a gamble, a few of mine with reliable tennants I only now have building and legal liability
     
  14. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    I've had two flooding incidents i've claimed landloard insurance on, and its completely unrelated to the quality of my tenants:
    1. Tree roots in plumbing causing overflow back into unit (absolutely icky and gross!!) and

    2. A water leak that flooded the kitchen while the tenant went on holidays for a week or 2 and only noticed when they got back. This caused damage to floorboards as the water soaked in and swelled the floorboard material.

    Issue 1 insurance got the carpets cleaned, and insurance reimbursed tenants for damage to their furniture on insurance. And since they had to move out for a couple of days I think there may have been a loss of rent payment too.

    Issue 2 I got paid for full unit flooring replacement (as you can't get the same flooring anymore). Got over 3k paid out.

    While issue 1 could also be claimed on strata, the second was not strata related at all.

    Now factor in that you can also claim if you have tenant issues, for the ~$400 pa I think its really good value to have. Tax deductible too.
     
  15. D&J

    D&J Active Member

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    Is landlord insurance the same as building insurance?
     
  16. euro73

    euro73 Well-Known Member Business Member

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    I'm afraid that's not good advice.
     
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  17. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    No, 2 different things. I suggest you check the Terri Scheer website to understand the differences.
     
  18. Plutus

    Plutus Well-Known Member

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    LL's insurance comes down to risk/reward. Personally I have it because I'm still starting out so my portfolio isn't remotely big enough that I can just self insure/absorb the costs & I've seen too many idiots on ACA and other rubbish news shows with their "tenant from hell" stories and how screwed the owner now is, to not have it. if i had 200+ properties, I probably wouldn't bother as I'd have enough trade contacts for regular maintenance, etc that I'd be pretty confident I could typically get things fixed for less than the $50-80kpa it would cost me.. Or not, maybe an insurer would give me volume pricing and it would make sense.

    As is, unfortunately I'm laughably far away from that sort of ownership number (nor amI aiming for it... ) So I'm not going to gamble tens of thousands of dollars to save a few hundred bucks a year that are a deductible expense.

    Here's how I look at it.

    Risk: Worst case, tenant does $xx,xxx in damages, I miss out on $xx,xxx in rent during repairs, tenant goes bankrupt/disappears/leaves the country/dies, efforts to collect cost $xx,xxx & fail.

    Impact: $xx,xxx in financial impact, 1/10 stress level that it COULD happen, 10/10 stress level if it DOES happen.

    Mitigation: Pay $285- $385 per annum as a tax deductible expense for an insurer to take on the risk.

    Mitigation impact: I'm $285-385 a year worse off financially but the risk and its impact are mitigated.
     
  19. Xenia

    Xenia Adelaide Property Manager Business Member

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    Landlord insurance covers you for the legal contract called the lease.
    The lease agreement is your income and your ability to hold the property and this is what you are protecting.

    It's true that people in lower socioeconomic areas default in rent more often but rent default are not exclusive to low socio economic areas. This is the reason we recommend landlord insurance in all areas.

    We've done claims on properties that were $900/week - definately not low socio demographic, but there was accidental damage to the property which we claimed.

    Landlord insurance covers also damage to property, pet damage, accidental or malicious damage.

    Building insurance covers you for the building whether you have a tenant or not.

    A severe storm causing the solar panels to break and leak into the ceiling causing it to collapse will be claimed on building insurance. Yes we've had this exact claim.

    The loss of rent from this - tenant needed to move out until it was fixed, was claimed on landlord insurance. This property was in Glenelg SA. Definately not a low end property.
     
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  20. HUGH72

    HUGH72 Well-Known Member

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    Extremely risky advice IMO and public Liability insurance is essential.
     
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