Landlord insurance: Insight from a leading PM

You have heard us going on and on about how important landlord insurance is (protecting properties is our passion, after all!)… but, if you are still not convinced of the value of specialist cover, maybe the wise words of a leading property manager will change your mind.

So, you have just bought an investment property and are now looking to protect your new asset and the income you are set to derive. How does one do that? Well, according to property manager Sophie Lyon, selecting the right insurance provider is an important part of the investor journey. The Director and General Manager of Property Management at Jellis Craig Hawthorn says it can even mean the difference between being a successful or unsuccessful investor.

So, with more than 27 years experience in the property management industry, what else does Sophie have to say about protecting investments? Lucky for you, we chatted to the property management guru and you can find out here…

Why is landlord insurance so important?

Everything is fine, until it is not. I have seen it happen time and time again; tenancies can change overnight as a result of circumstances changing – marital breakdowns or job losses – and landlord insurance is put in place to catch that.

You wouldn’t be an owner-occupier without having insurance to protect your asset and your contents, and it should be the exact same for investors. Don’t put yourself in a situation where you end up losing lots of money because you didn’t invest a small amount for cover (plus, it’s a tax deduction).

What makes a good landlord insurance policy?

Landlords need something that covers them across the board and I find that specialist providers are best. I have seen some landlords get policies through general providers (like banks) but the policies being offered only offer minimal cover and then they have a bunch of add-ons. So, while you think the policy is meeting your needs, you are actually missing out on important features. It is important to get an all-encompassing policy which covers your property for both common and uncommon risks.

And what risk should the landlord be looking to cover?

The common inclusions in a policy should be loss of rent, tenant damage and weather events like storms, floods and fires. However, one that is sometimes overlooked is denial of access. Say the tenant refuses to leave the property and you have to go to court to get them evicted, denial of access will cover this and you should be able to claim for loss of rent while you go through the eviction process.

What mistakes do landlords make when choosing a policy?

Oftentimes I see people choosing the easiest option. So they get the policy through the bank they have the mortgage with because it all gets bundled up. However, they don’t actually compare policies. I also see people choosing the cheapest option however in my opinion it is not always the cheapest or the most expensive that is the best – it is the one that is somewhere in between. Landlords need to do their homework or work with a property manager who is across this.

Give us an example of a time landlord insurance has come through for a client…

We had a client that had an issue with an oven. It was one of those ovens that have the ability to heat up and clean itself. Inside it had two panes of glass and the tenant broke one of them. They then went and bought a cheaper pane of glass to replace it, and when the oven heated right up, the glass shattered. As the oven was a bit older, the correct parts for the oven were no longer available. So, the insurer actually covered the cost of a new oven.

What about a horror story?

Often we see landlords really struggle when it comes to loss of rent. If they don’t have landlord insurance, and the tenant has defaulted on rent, they quickly discover the bond is nowhere near enough to cover the missing rental income and then the clean-up when the tenant vacates. While the bond is absolutely there to protect a landlord, the timeframes to legally get a tenant out of a property when they default on rent can stretch out. It takes about four weeks to get into VCAT, sometimes longer, and then there is a 14 day period where the tenant needs to vacate. So you are looking at six to eight weeks until you get possession of the property. The bond is not enough and that is where landlord insurance steps in.

While the insurance policy is important, what about the insurance provider?

When looking at landlord insurance, the performance of the policy is important but I think so is the agent having had experience in dealing with the insurance provider. There are lots of insurers that make you jump through hoops and find ways not to pay claims. However, if your agent can say to you ‘we have worked closely with this company, we know how they work and we understand the claims process’ then that is important.

How important is it that a landlord engage a property manager?

With the changing legislative environment, I don’t think it has ever been more important for an investor to have a property manager. This is because a property manager can help them navigate all the changes in the latest legislation and make sure they don’t inadvertently do anything wrong. Also, I think it is important there is a professional distance between the owner and the tenant. Sometimes this relationship becomes a little too cosy and it can be a lot harder to issue a breach notice or have a discussion about upping the rent if there is a friendship involved.  

*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 here, contact 1800 661 662 if you have any questions.