Landlords…Insure!

When choosing landlord insurance, many property investors first look to the well-known mainstream insurers, often because they took out a building protection policy at the point of purchase. Providers like QBE, AAMI, NRMA, RAC, Allianz and similar household names, offer so-called landlord insurance as an extension of their standard home or building policies. It seems easier to simply ‘extend’ that cover for the landlord component thinking that in the case of tenant default, you’ll be covered. Unfortunately, (and this is my opinion, not advice)most of the mainstream landlord insurance policies are inadequate and fail to properly protect property investors.

This is because such policies are typically adapted versions of standard home insurance, rather than products specifically designed for rental properties. That means the cover is limited when it comes to the specific risks of tenanted property. In practice, many mainstream policies exclude or restrict claims related to tenant default, malicious damage, or loss of rent. Legal costs involved in evicting tenants or recovering arrears are often absent or only available as optional extras. Even when coverage is offered, the policy definitions can be narrow, leading to disputes or denied claims when landlords need them most.

By contrast, specialist insurers such as Terri Scheer, PIP and EBM Rentcover provide specialist policies to protect landlords in circumstances when tenancies go sideways. Most tenancies run smoothly – rent is paid on time and the property is well cared for. However, a change in a tenants’ circumstances such as loss of relationship or employment, bereavement or health issues, can derail the tenancy causing significant loss to the landlord. Residential tenancy laws generally protect the rights of the lessee causing delays in removing a tenant that is in default. These specialist policies cost about $400 per annum – cheap for the cover they provide.

From experience, these specialist landlord insurance policies have saved property investors from significant loss whereas those happy to extend their existing building policy with a mainstream insurer end up questioning the purpose of the policy given its lack of cover in the event of a claim. For example, one large insurer’s landlord policy only covers the owner for loss of rent after the four-week bond has been used for that purpose, meaning there’s no funds left for damage or tenant malfeasance.

Most landlords don’t take our specialist cover simply because they’re under the impression their mainstream extended insurance does the same thing. They simply do not.

Be aware real estate agents (including my agency) receive a commission from specialist landlord insurers for properties under their management upon taking out such policies on their client’s behalf. An agent will not receive a commission if the landlord takes out the policy directly with the insurer.