5 non-negotiables when it comes to landlord insurance

To help navigate the world of landlord insurance and make sure you have the most suitable cover for an investment property, here are five non-negotiables when it comes to choosing protection:

1. Loss of rent

This is cover when your tenant fails to pay their rent, perhaps because they have absconded or are simply refusing to pay. Once rent begins to be missed, the drain on your investment can accumulate very quickly.

When should cover for loss of rent kick in? It can cover a range of situations including:

• When a tenant refuses to leave the property (denial of access) and a court order is required for possession of the property (at EBM RentCover, this is covered up to 52 weeks).
• When a tenant just stops paying rent or departs the property unexpectedly (at EBM RentCover, this is covered up to six weeks).
• During repairs when a property is uninhabitable following tenant damage or insured events e.g. fire, storm and flood (at EBM RentCover, this is covered up to 52 weeks).
• When a tenant passes away at the property (at EBM RentCover, this is covered up to 52 weeks).

You will need a policy that will compensate for loss of rental income. If you rely on standard home and contents insurance, you may be left out of pocket, as these policies don’t often cover claims for tenant-related issues like loss of rent.

Don’t overlook this policy feature simply because you are confident you have tenants who will pay their rent in full and on time. Defaulting on rent has been known to occur when trusted and reliable tenants experience unforeseeable circumstances or financial hardship due to job loss, illness or death in the family.

2. Accidental damage

Anything is possible – from a tenant accidentally cleaning the carpet with bleach to a stove being left on causing significant fire damage to the kitchen – and small mistakes can equal big repair bills.

Not all insurers cover accidental damage, so it’s important your landlords choose a provider that does. At EBM RentCover, we provide up to $65,000 in cover for accidental damage caused by tenants, their pets and guests.

3. Malicious damage

On the other side of the coin, not all tenants are the best tenants in the world and, despite your best efforts, sometimes your property bears the brunt of their anger.

Making sure you have cover for malicious damage (deliberate acts that cause damage to the property, like punching holes in walls) is paramount.

Tip: Check to see if cover for malicious damage extends beyond the tenants to include the actions of any family and visitors on the property.

Similar to accidental damage, not all insurance providers provide cover for malicious damage, so it’s important to make sure the chosen insurer does because you just never know what can happen if relationships turn sour. EBM RentCover policyholders have the peace of mind in knowing they are covered for up to $65,000 in malicious damage costs.

4. Liability

There is mention in most landlord insurance policies about legal liability (sometimes referred to as “public liability” or “liability to others”) and it usually notes a cover limit stretching into the tens of millions. Many landlords know there is cover for liability, but it is not until something goes wrong they realise how invaluable this protection can be.

Liability claims can be for large sums of money (to date, the highest personal injury claim in Australia for one person was an eye-watering $19 million), so it’s important to ensure the insurance provider includes liability cover in the policy and also to be aware of the maximum amount that is covered. At EBM RentCover, up to $30 million in liability cover is offered, based on the type of policy.

5. The right landlord insurance provider

A good insurance provider will offer comprehensive and tailored insurance options that specifically cater for landlords and products based on their extensive knowledge and experience in the property industry.

EBM RentCover introduced one of Australia’s first dedicated landlord insurance products back in 1991 and now partners with more than 1,700 property industry professionals across seven states and territories and has more than 150,000 investment properties under cover throughout the country.

It is also important to be aware of the claims process and the customer service the insurance provider offers. Complicated and convoluted applications and poor customer service will only cause extra frustration at a time when there is already a lot of pressure. Running through the process beforehand and choosing a provider who has a simple and efficient claims process and excellent customer service can go a long way to preventing headaches in the future.

Finally, and possibly most importantly, is to research how often the insurer pays out claims. All the promises of good cover and great service come to naught if the insurance provider has a history of squeezing through loopholes to avoid paying out on claims. For the record, EBM RentCover paid out more than 5,500 claims worth in excess of $20 million last financial year – and a whopping 93 per cent of all claims submitted were paid (many within five working days).

By Sharon Fox-Slater, managing director of EBM RentCover