A Dozen Landlord Insurance Pitfalls
By Sharon Fox-Slater on 3 Apr 2014
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Photo: Timo Waltari, Creative Commons
Unsuspecting property investors can be left out of pocket by thousands if they fall victim to any one of a dozen common insurance pitfalls.
The simple fact that not all insurance is the same makes it extremely difficult to weigh up the benefits of one policy versus another.
People often spend more time choosing a flat screen TV than insurance for a rental property worth hundreds of thousands of dollars.
Often the glossiest brochure or cheapest price wins out and the landlord is left exposed.
It’s just as important to work out what isn’t covered as what is.
“A reliable tenant and a good property manager are not enough to protect you.”
Some policies won’t pay out on claims when a fire is deliberately started by a tenant, if the property is on a month-to-month lease or accidentally damaged by a tenant.
Other issues to consider include the company’s reputation – what do their customers who have had to make claims have to say about them?
My colleague, Brett Clarke, has – like me – been in the landlord insurance industry for more than 20 years.
He’s written a free e-book outlining traps for the unwary, titled 12 Most Common Pitfalls When Insuring Your Rental Property. (See the RentCover website if you’d like to download it.)
Naturally, he favours RentCover, but the eBook can help landlords differentiate effective from inadequate insurance policies, regardless of which product or firm they end up choosing.
There’s more detail in the eBook but, in brief, the pitfalls are:
1. Buying on price alone — look for ‘value’ not ‘cheap’.
2. Deliberate fire by tenants — some policies exclude this.
3. Excess — how much, and can the bond be used as payment?
4. Underinsurance — insuring for less than true replacement value.
5. Malicious damage by the tenant — is it covered?
6. Accidental damage — some insurers limit cover to the contents not the building.
7. Check the qualifying (or disqualifying rules) — beware the fine print.
8. Check for complete cover — some combined house and landlord policies offer less cover than specialist landlord policies.
9. Court orders — do you need a court order to claim for rent default?
10. The belief that the Body Corporate already insures my property — not for liability if someone hurts themself inside.
11. Periodic tenancies or lease continuation — some won’t pay out for claims if the written lease has expired.
12. When you figure out ‘you don’t need insurance’ — a reliable tenant and a good property manager are not enough to protect you.
