Case studies

Landlord insurance: What could possibly go wrong?

Insurance is a way to protect your investment property from a range of events – those you can imagine, and some you haven’t even thought of yet. So just what kinds of risks can impact your rental?

“What could possibly go wrong?” It’s a question that people ask when they are looking to safeguard those things that are most important to them – like their health, their pets, their vehicles and their property. And it’s the foundation for insurance – providing cover against financial losses stemming from a range of risks.

When it comes to property – whether it’s your own home and contents or your investment property – there are certain risks that all owners may face. These include:

• damage from severe weather events and natural disasters such as storm, hail, bushfire and flood.
• accidental damage
• theft and attempted theft
• malicious acts like vandalism
• house fire
• water damage (escaping liquid)
• fixed glass breakage
• electric motor fusion
• public liability (in case someone gets hurts on the premises).

For landlords, there are other common risks including:

• loss of rent – as a result of:
  • tenants absconding
  • arrears
  • financial hardship (caused by job loss, relationship breakdown, illness and partner death)
  • denial/prevention of access
  • tenant death
  • the property requiring repair after an insured event
• malicious damage (inflicted by the tenant)
• intentional damage (also inflicted by the tenant)
• pet damage
• theft by tenant
• drug lab clean-up.

It’s these tenant-related issues that account for the majority of claims landlords make on their insurance. Last year EBM RentCover received almost 6,500 claims – and more than half were for tenant-related losses like rent default and damage.

The damage tenants can cause sometimes beggars belief. And it may not be a single action taken by your tenant that results in a claim. Oftentimes it’s a case of multiple incidents constituting a significant loss.

Take for example this recent claim…

Two tenants moved into a rental in Yarra Glen, Victoria, paying $1,350 a month rent. Everything was fine for the first year, but the following year the tenants fell behind in their rent. The matter went to the tribunal and the landlord was granted a warrant of possession – and what they discovered was shocking. Not only had the tenants stolen items from the rental, they had allowed their two bulldogs to wreak havoc, destroying flooring, curtains and walls. The loss of rent, theft and pet damage resulted in a total claim of just under $35,000.

As shocking as that was, it’s not as uncommon as you might think. And there are plenty of unusual ones too!

Dingoes, and foxes and cats – oh my!

While you might expect Fido or Fifi to cause a little damage that their owners will fix, you’d be hard pressed to imagine a situation where your property became home to more than 100 feral animals. But that’s what one owner had to deal with. They had approved the tenant keeping two de-sexed cats, two de-sexed dingoes and two de-sexed foxes at the five-acre property. It was later found the tenant was running an animal shelter from the rental, housing what was initially thought to be around 40 animals, predominantly foxes and dingoes. In fact, the tenant had upwards of 100 animals at the property. The tenant was evicted but the landlord was left with having to dismantle, remove and dispose of the animal enclosures that the tenant had erected and repairing the damage caused by the animals inside the property (scratched floorboards and urine-soaked carpets). All up, the landlord’s claim was around $30,000.

RV – runaway vehicle

Christmas Day 2020 was not a good one for one landlord. At about 4pm a driver lost control of their vehicle, clipped a parked car and then hurtled through a vacant block and two boundary fences before colliding into the back of the rental. Suffice to say, the property sustained severe damage including to the alfresco area, patio, kitchen, and living and dining areas. As the property was deemed uninhabitable, the tenants had to move out, so the landlord not only had repair costs to contend with but also a loss of rent while the repairs were made. Without insurance, the landlord would have been left to foot the $52,000 bill.

How’s the serenity?

A couple of years back we had an interesting claim when a tenant decided a bit of a makeover was in order. After living at the property for about three years they moved out. But they left behind some handiwork. They had painted the exterior of the house without permission, painted feature walls in bright colours inside the property, and also made major modifications to the backyard including installing a stone pizza oven, a trellised pergola, raised brick garden beds, and a fishpond. The $13,000 claim covered the cost to repaint the exterior of the property, repaint the interior feature walls, remove all the unapproved garden modifications and repair the damage to the premises caused by them.

Word to the wise: Whether a landlord needs to make a claim for a common scenario or one that is out of the ordinary, it’s important to make sure that the loss is covered. Insurers can only respond to claims if they meet the terms and conditions of the policy.

So the answer to the question “what could possibly go wrong at my rental”, is “quite a lot”, including scenarios you’d be hard pressed to imagine. That’s why it’s important to have specialist landlord insurance in place to cover those risks – both common and uncommon. Chat to a member of our Expert Care team about our cover options – 1800 661 662.

*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.