Why get Landlords Insurance
Although there is no set percentage, we’ll go with ‘in most cases’ your tenants will respect your investment property, and ensure the rent is paid on time every time. I’m sure you’ve realised now that the real estate industry is not always a fairy tale.
It is always good to have a plan in place for the rare occasion when things do not go according to plan.
The most common features of landlord insurance is to cover intentional damage to your property caused by the tenants or their visitors, cover the rent in events where the tenant does not pay, covering any theft, and also any applicable legal fees which you could incur if either you or your occupiers decide to take legal action over damage to the house.
An example of this cost would be such as representation of your Property Manager attending to court, which can be an added expense above the normal management fee. Various policies will cover different eventualities, so it is wise to double check what is included in your cover for your own peace of mind.
I could go on all day about these importance’s however it would be better to outline some examples. A landlord has been extremely fortunate in having stable tenants for four years. No damage from any inspections, rent always paid in advance. He didn’t need landlord insurance…or so they thought. Unfortunately due to the fall in the resources industry the tenant lost their job. Also due to an extremely specialised skillset they were unable to secure another job quickly. The rent was $1,000 a week and after three weeks the tenants was unable to continue the rental payments. Following the legal procedures set within the lease, the PM followed the appropriate steps, issued a breach, and then issued a termination after this.
Approximately 40 days from the initial breach the matter is taken to court in which the lease is terminated and the tenant is ordered to pay rent towards the owner(around 7 weeks would amount to $7,000). Hooray all sorted, not exactly. Throughout the court negotiations the court agreed that the tenant would only pay $4,000 and over a payment plan schedule. In this instance $3,000 of rent was lost, the owner had to cover mortgage costs whilst the property was vacant, had to pay for a new carpet, AND also had to cover costs of the PM representing them in court. IF the landlord has insurance then these costs would have been covered (depending on the policy).
It should also be noted that some landlord insurances go beyond the main issues and also cover acts of nature such as Storm damage (including damage from lightning strike), Fire, Flood, and possible civil unrest and rioting.
It is advisable to check the policy carefully to ensure cover is adequate.
Disclaimer *The above is general in nature and all insurance advise should be obtained from a registered insurer.