10 landlord insurance myths debunked

There are a lot of misconceptions about landlord insurance – from what is covered to what’s not paid, and more in between. Here we explore 10 common myths and set the record straight.

Insurance is an industry bound by complex laws and regulations. And, to be fair, it can be complicated. Perhaps not so much shrouded in mystery as cloaked in confusion, there are a lot of misconceptions about insurance cover.

Here we take a look at 10 of the common myths around landlord insurance.

Myth 1: A specialist landlord policy isn’t necessary

Landlords often think that their investment property will be adequately covered by taking out a standard home and contents policy. While such a policy might respond to property damage from an insured event, it is unlikely to respond to tenant-related losses like loss of rent, which is the most common claim landlords make on their insurance. Only a specialist landlord insurance policy will provide the protections property investors need for the unique risks they face when leasing their rental.

Myth 2: It’s too expensive

Insurance can seem like a waste of money or a luxury, especially if the policyholder doesn’t need to make a claim. But if something goes wrong at the rental, the landlord could be left holding the bag and unable to recoup their losses. EBM RentCover Ultra premiums start at $386 per annum – that’s less than the price of a drive-thru coffee each day – making cover a cost-effective safety net.

Myth 3: All landlord insurance policies are the same

Landlord insurance is designed to cover property investors against the most common risks they face. It’s a specialised product, with the best insurance providers offering policies that suit a range of letting scenarios. But not all insurers offer cover for the same risks, have the same inclusions and exclusions, or terms and conditions. It’s important that landlords select a policy that is right for them and the way in which they lease their property.

Myth 4: The cheapest policy is best

Everyone loves a bargain. But when it comes to landlord insurance cover, policyholders should consider what they’re getting for their money. Not all insurance is created equal and there can be huge variations in what is offered by different insurers and in different policies – it’s why the premiums differ so much. Policyholders should carefully consider aspects of the cover including inclusions, exclusions, limits, excesses and optional extras. Not all insurance providers are created equal either, so it’s prudent to also consider who the provider is, their reputation, their customer service and how they deal with claims and repairs. Ultimately, policyholders should base their decision on value and need, not just price.

Myth 5: ‘It’ll never happen’…

No-one ever needs insurance… until they do. The truth is, letting property comes with risks. Some risks can be mitigated through good management, but insurance is about protecting against the unpredictable. The weather is unpredictable. Tenants can be unpredictable. Accidents are unpredictable. And when it comes to the unpredictable, the right landlord insurance policy can be invaluable.

Myth 6: Landlords only need insurance when the property is leased

The rental only needs to be insured when it’s occupied, right? Wrong! While many of the most common risks occur when there is a tenant in the property (like accidental damage or loss of rent), there are other non-tenant related risks the right policy will cover. Risks that can occur whether there’s an occupant or not include damage from fire, storm, theft and escape of water (think burst pipes – this is a common claim we see in unoccupied properties). Landlords also need legal liability cover even when the premises are not occupied in case anyone who enters the property, such as during an inspection or to carry out maintenance, is injured.

Speaking of leased property… there’s also a misconception that tenants must be on a fixed-term lease in order for the landlord to make a claim. While many policies require a fixed-term lease to be in place at the time of a loss, EBM RentCover Ultra and Platinum also cover periodic leases. 

Myth 7: The property is always covered

It’s dangerous to assume that just because there is a policy in place, the property is covered at all times. The fact is, there are times when the property may not be covered, such as when the premises are being renovated or left vacant/unoccupied for an extended period. Scenarios like these present greater risks for the property (like damage), which is why insurers need to be informed so they can decide if they will continue to cover the property and, if so, under what conditions.

Myth 8: All loss of rent eventualities are covered

Landlords who think they will be reimbursed by an insurer for any kind of rental loss may need a rethink. When landlord insurers talk about cover for ‘loss of rent’, they are referring to very specific circumstances where losses occur, known as insured events. These insured events may include a tenant defaulting on their rent or obtaining a hardship order, the tenant being evicted, the death of a tenant(s) or unsafe living situation following another insured event (e.g. the property is uninhabitable due to fire damage). Rent losses stemming from market conditions are not claimable. For example, a landlord can’t claim simply because they can’t find a tenant. Market conditions are a risk all investors must accept and are uninsurable.

Myth 9: Tenants are covered by the landlord’s insurance

This is a common misunderstanding for both landlords and tenants. The landlord’s insurance only covers the losses the landlord may suffer as the result of an insured event. The only time the landlord’s insurance may cover their tenant’s losses is if the landlord was negligent in some way and caused the tenant’s loss. Tenants need their own contents insurance to cover their possessions at the property and their legal liability.

Myth 10: Claims are never paid

Insurance companies are often cast as the big, bad villain. They take the policyholder’s money and then always decline any claim. Contrary to popular belief, very few insurance claims are knocked back. According to the Insurance Council of Australia, general insurers pay out an average of $135.9 million in claims to policyholders every working day and only decline around 3-4 per cent of claims. The fact is, if the policyholder has a policy designed to cover a particular situation, and that’s what they claim for, then there should be a high level of confidence that the insurer will pay-out.

At EBM RentCover, our reputation and future success is built upon a foundation of integrity and honesty – and ultimately honouring appropriate claims submitted by policyholders. Last year, we have paid out more than $39.9 million in claims.

Landlord insurance is an important investment – it covers a range of risks unique to the rental market and the right policy can protect property owners from the financial fall-out from insured events. Explore the range of EBM RentCover landlord insurance policies available or get in touch with a member of our Expert Care team to discuss cover.

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions.