Landlord Insurance

The Body Corporate will only cover the building and common areas, the interior of your townhouse is your responsibility. That will include what is classed as your contents (carpets, curtains, blinds, light fittings etc.) and even the internal paint, these are things you need to insure, they will not be covered by the Body Corporate policy. Your risks are all the defined events such as fire, storm, water damage etc. as well as of course the tenant-related risks such as malicious and accidental damage, theft by the tenant, and loss of rent situations. The other risk, as has been mentioned, is probably the biggest, liability. Should a tenant or a visitor injures themselves or suffer another loss that a court deems was your fault (lifting carpet resulting in a fall down stairs for example, you could find yourself being sued for hundreds of thousands if not millions of dollars.

Unfortunately it's a common misconception that the Body Corporate insurance will cover owners for any losses other than the tenant rent loss.

 

Just to clarify here, as this is where the word "flood" gets used incorrectly. These were not "flooding" incidents by insurance definition, these are "water damage" incidents and completely different. I just wanted to clarify as people get caught up on the word "flood" when it is something else. Flood itself is a very specific definition that has been set down by legislation.

 

Interesting thought process. Are there no bad tenants in higher demographics?

 

You may be surprised at the incidence of tenant-related losses in areas that are anything but "low socio-economic" areas. A recent claim was in a property renting for $1,500 per week and included malicious damage, rent loss and theft by the tenant. Remember that if you lose even a few weeks rent in a $1,500 per week property it's a pretty substantial loss, so saving a few hundred dollars on insurance may not be wise.

Certainly most losses in this rental bracket are for rent loss rather than damage, but they add up very quickly. Often the tenants are Company Directors, CEO's etc., you'd be surprised with who defaults on rent for a variety of reasons.

The other side is that if it is a unit/townhouse, you need to insure your contents (carpers, curtains, blinds etc.) and liability anyway, it is often cheaper to take out a landlord insurance policy that includes all this as well as the tenant-related risks for a cheaper premium than simply insuring the defined events/liability on it's own.

 

Even at low socio economic levels, LL policy costs about a weeks rent. Given that they pay 6 weeks rent for rent defaults, its a no brainer basically, especially given how many other things they cover too.

For anything above that level, it's a penny for a good nights sleep.

 

May be a silly question but bear with me!

I've been living in a house that will now become an IP. I have a building and contents policy that covered me until now but I will be looking to take out a LL policy when the property is rented.

Is it worth keeping the building insurance with the old provider as it is cheaper and then adding on a LL policy with say EBM or Terry Sheer or better and easier to combine under one insurer?

 

Not silly & not simple to answer.

It will depend, the LL policies are not good for flood, the good flood cover have poor LL cover, you really have to check what you need for each property, then look at what the insurers provide and determine from there what seems best.

 

I will probably get shot down in flames for this but here goes. I get building insurance only and not landlords insurance.

From what I've been quoted landlord insurance is about $350/year. I own 5 property's so this would be roughly $1750/year.

So far in 10 years I've never had problems with malicious damage or rent default. So therefore I'm theoretically up $17500.

So if tomorrow one of my tenants goes and punches holes in every wall, burns the carpets and it takes me 6 weeks to get him out in which time he doesn't pay any rent. I'm still well and truly up.

A gamble perhaps. But I don't mind taking a calculated risk and certainly lose no sleep over it at night. Each to their own though.

 

Landlord Insurance is cheap and as your portfolio grows ask them for multiple property discount. LL and Building Insurance are the first things I organise once the contract has gone unconditional.

 

I have investment property building insurance that includes $20m public liability. So only risk the tenant malicious damage, and lost rent. Is this the main issue and correct assumption?

Thanks

 

Got a good price of AAMI. $213. Thought that was good value compared with other quotes.
Has good cover

 

Well, there are plenty of people who probably do not insure, heck I know some who never had any kind of insurance at all, nil .....

If you have had places for a while, or the land value is so much more than the building, then you may see a total loss as an actual improvement & far less paperwork.

You could risk the tenant component, but again only if your in the financial position.

I am not sure, have you asked your insurer if they cover the building if your tenant starts a fire ? A lot have 2 different type of policies, one for OO and one for LL. Ask them to be sure.

Not familiar with the product or pay out record, is a cheap enough price, have you compared the PDS to other insurers ?

 

I just looked up the PDS.

For rent default, they begin paying at 5th week of no rent and continue for 13 weeks.

EBM for comparison begins at day 1 of no rent and pays 6 weeks.

The former is longer, but I think I'd prefer the latter as most rent default situations would be fixed by a competent PM by time you get 6 weeks out of the former. It also sounds like they have an excess payable.

Maybe others interpret it differently?

 

Yes I had a tenant trash my 'higher demographic' IP and keep a live Guinea pig in a built in wardrobe draw

I found AAMI stupid, the excess is very high

 

As long as you are prepared to pay the significantly higher excesses and not have cover in quite a few situations then yes, you will save a few dollars. Insurance is really about how much risk you wish to absorb yourself. My understanding of the AAMI policy includes:

• No cover for Accidental or Deliberate Damage by the tenant - these make up the vast majority of tennat-related damage claims
• I believe the default excess for defined risks claims is $750 which is very high, you can make it less but at an increased premium
• With loss of rent claims (which are easily the most common claim) they do not pay the first 4 weeks, so in the majority of loss of rent situations there would be little or no payment whatsoever
• Excess on Malicious Damage by tenants is 4weeks rent, which is very high
• No cover for tenant-related losses if the tenant moves on to a periodic tenancy once the fixed term expires

I'm unsure what State your property is in, but I expect you are saving less than $100, which is tax deductible, so after tax saving I wouldn't see as being very significant given the increased risk. One loss of rent claim where an excess of 4 weeks rent applies would blow that saving apart for many years to come.

 

Hi All,

I have got duplex under construction in Toowoomba under one title. What insurance do you recommend to have before it gets handed over?