It has been a turbulent couple of years for the investment property industry and the trend is likely to continue in 2022. While some things change, one thing remains clear – landlord insurance is a wise investment.
If COVID-19 has taught us anything, it’s that the rental world can change quickly and it is easy to get caught up in the aftermath. Many landlords across the country have come face to face with this reality over that past two years as the pandemic landed and brought with it economic and social implications.
Restrictions and government-mandated actions, like eviction moratoriums, were imposed. These had financial ramifications for landlords and those who had insurance found themselves in a better position than those without.
By and large, the restrictions that were imposed during the height of the pandemic have ended, and it has been business as usual for the rental property industry. But, as we have learned, things have a way of evolving and taking us by surprise. A lot of landlords were blindsided when those COVID restrictions first hit in 2020 and were caught short if they didn’t have the right insurance cover.
Fast-forward to today and it is a case of “never say never”. No-one knows what lies ahead and how it may impact the rental market and landlords. That is why landlord insurance is still a wise investment. Need more convincing? Here are 10 reasons why it pays to protect your investment property.
No-one needs insurance – until they do!
Insurance can seem like a waste of money, especially if you don’t need to make a claim. Deciding to “self-insure” (e.g. cover the risk yourself) may sound like a good way to save money, but it’s often a false economy. You may save a few hundred dollars in insurance premiums, but if something goes wrong at your rental, and you’re left facing a repair bill and the loss of rent, those savings will be wiped out and then some. Landlord insurance is competitively priced, offers suitable cover for the most common types of risks and is an investment in peace of mind. Besides which, you can often claim the premiums as a tax deduction.
Beyond your control
Even the best of tenants can have things happen that mean they can’t pay their rent – unemployment, illness, divorce/separation, death. The right landlord insurance can help you recoup those losses.
Not paying and not leaving
On the flipside, there are some tenants who turn out to be far from ideal. As a landlord, you could find yourself dealing with the financial hole that’s left if your tenant fails to pay their rent. Renters “doing a runner” can leave a landlord thousands of dollars behind. And, if you have a tenant that decides to not pay, and won’t leave either, then there’s a whole other world of financial (and legal) pain to deal with. It’s not uncommon for these types of problems to take months to resolve – during which time you aren’t receiving any rental income. Only specialist landlord insurance offers cover for rental losses.
You know the thing about accidents? You simply can’t predict them. You can have the best tenants in the world, but your rental might suffer accidental damage. Things get spilled, things get knocked, things get broken. It just happens. And while your tenants may be responsible for fixing the damage, having landlord insurance with accidental damage cover provides a financial safety net, especially if the damage is substantial and it is not reasonable to expect the tenant to be able to pay the costs (for example, an accidental fire destroys the property).
Mother Nature can be very unpredictable and there’s no telling what will happen when wild weather strikes. Bushfires, storms, cyclones, floods and hail can all cause significant property damage. Without insurance, you are left to pay for the repairs yourself. And don’t forget, you may also suffer loss of rent if your tenants must move out because of the damage.
You might be surprised just how often landlords need to make a claim for damage caused by a water pipe bursting and flooding the home. One burst pipe can result in thousands of dollars in repairs. Landlord insurance can cover water damage, if the cause of the damage is an insured event.
If someone is injured on your premises, or suffers property damage/loss, and it’s your fault, you can be held liable. Legal liability claims can stretch into the hundreds of thousands of dollars – landlord insurance can provide you with cover stretching into the millions.
See you in court
It’s not something anyone wants to think about, but as a landlord you just may find yourself having to go to court, or appear before a tribunal, over a loss of rent matter. Anyone who’s ever hired a lawyer knows the fees can be eye-watering. With the right landlord insurance, legal expenses may be claimable.
Criminal element – part 1
It’s a sad fact that break-ins are common. Your contents can be damaged or broken by thieves. If you’ve failed in your duty of care (e.g. failed to repair broken locks), you could also be liable for losses your tenants suffer too. Without insurance you’ll have to pay to repair or replace what’s been lost.
Criminal element – part 2
Perhaps even sadder is the fact that sometimes the criminal element is actually your tenant. It’s not unheard of for tenants to steal fittings and fixtures from the rental – often when they abscond after not paying their rent either. It is also not a rarity that tenants inflict malicious damage at the property. Depending on the policy, landlord insurance can reimburse you for losses from tenant theft and malicious damage. If you are really unlucky, you may find your tenant is using your property for illegal purposes – like operating a drug lab. EBM RentCover is one of the only landlord insurance providers that offers cover for drug lab clean-ups.
Every investor wants a secure investment and reliable tenants. But sometimes not everything goes to plan. And some events cannot be controlled. What can be controlled is whether you have the safety net that comes with landlord insurance.