The festive season is here, and with it the possibility that your rental property will be damaged. From parties, to tenants putting up decorations and even, sadly, the strain of the season taking its toll on occupants, it’s a time of the year when damage can befall an investment property.
Once the warm glow of the season passes, you may find you need to claim on your insurance if tenants fail to repair any damage they or their guests have caused. And, depending on your insurance provider, you may find you don’t actually have any cover.
But damage is damage, right? Not when it comes to insurance. Different insurers treat the different types of damage differently and knowing the differences can mean the difference between a successful claim or not!
There are three categories of damage considered by insurers: accidental, deliberate/tenant and malicious. Damage cover also varies among insurers and not all companies cover each type – in fact, most exclude one or more (and may or may not cover both the building and contents).
The difference between the types of damage lies in the intention – or cause – behind them.
‘Accidental damage’ is damage that has resulted from an unforeseeable or unintentional event; that is, the damage was not caused on purpose.
It is sudden and unexpected damage to property and should not be confused with general wear and tear which occurs over time and is not covered by insurance.
Examples of seasonal accidental damage include:
When a tenant damages/alters the current state of the property ‘on purpose’, but without malicious intent or by accident, it is generally considered ‘deliberate’.
“Making the place our own” is often the motivation behind the redecoration or modifications made without the owner’s consent, and the intention is not specifically to cause damage.
Examples of seasonal deliberate damage include:
‘Malicious damage’ is often where there is most confusion for landlords, who may think the damage caused by tenants was ‘malicious’ when in fact it was ‘deliberate’.
In order for the damage to be considered malicious, there has to have been ‘malicious intent’ behind it (carried out with vindictiveness or spite); that is, the tenant must have been motivated by malice and intended to cause damage (proving this can sometimes be difficult).
This type of damage can also sometimes be considered criminal damage, which can incur heavy penalties including fines or imprisonment for perpetrators. Incidents of malicious damage should be reported to police, especially if you intend to lodge an insurance claim.
The strain (financial and emotional) of the season can sometimes result in issues arising between landlord/agent and tenant (such as unpaid rent leading to eviction) or between tenants (such as domestic violence), in which a tenant takes out their frustration or anger on the property.
Common examples are:
Even though an insurance policy may cover the cost of accidental, malicious or deliberate/tenant damage, the tenant is ultimately liable for paying for the repairs.
The insurance safeguards your investment by making sure you are not financially disadvantaged when damage is not repaired by tenants.
It does not absolve the tenant of their responsibilities – and after settling the policyholder’s claim, the insurer will generally pursue the liable party through debt collectors or the courts to recover costs.
No-one wants to get the dud end of the Christmas cracker by only finding out at claim time that their landlord insurance cover completely excludes some types of damage.
Increase your chances of winning the crown by checking the policy wording, understanding how your insurer defines different types of damage and the exclusions and excesses they stipulate for each damage type.
With all the info and insurance protection you need in your Santa sack, you can jingle, jingle all the way to a joyous festive season.