Landlord insurance is a must have for all landlords and insurers are already reacting to the changed market condition. Covid-19 will drastically impact the property market and we are already seeing the first order effect through drop in rents and property values. We expect second order impacts to come through the balance sheet of the banks where the market is already pricing in a prolonged period of weakness via the lower bank share prices.
Loss of Rent Cover
Landlords are feeling the crisis through the increasing number of tenant default as a direct result of increasing job losses. If you have landlord insurance, the risk of rent loss from tenant default is covered under the rent default clause in the insurance policy. However because of the suddenness and widespread impact of the increasing tenant defaults most insurers have reduced or remove rent loss cover from residential landlord policies.
This is mostly applicable to new policies and it is still covered under renewals. It is best to check with your insurance provider at renewal to confirm if rent loss is still covered.
Some insurers has left the market altogether and stopped providing rental property insurance.
All You Need to Know About Investment Property Insurance
Landlord insurance policy protect the landlord against risks such as
- loss of rent due to tenants not paying rent (pre-Covid)
- Damage to the property as result of the tenant (accident or intentional)
- Protection from natural disasters (flooding etc)
- Loss from theft or burglary owned by the tenant
- Landlord legal liability cover
- Temporary accomdation costs
- Fire cover
The range of the policy coverage depending on selection or insurer minimums so it pays to review the policy in detail and the product disclosure statement.
Any claim under the policy will require excess payment. The amount of excess will be decided by the type of claim made.
The policies can be bought either directly from the insurer or from the insurance broker. This is called the insurance distribution channel and it is really dependent on how the insurer want to sell their policy such as online only or through brokers only. So it pays to shop around to find the best policy as it is unlikely one place will have all the best policies.
What Information Does the Insurance Company Need?
There are a standard set of question the insurance broker or company require to price the right policy.
Type of Cover Required
- Is it a Buildings & Content Cover. They can also cover just the building it self or the content only in the house only as well.
- Is there a mortgage on the property
- Is it currently rent / unoccupied and if it was previously rented, how many tenants has the property had in the last 12 months.
- Will the investment property be managed by real estate agent or self managed
General Property Information
- A written or oral rental agreement in place?
- Expected income of the property
- Is there any business activity done from the property
- Different rates will apply to type of property like houses, apartment, townhouse or terraces house etc
- Is there a body corporate or strata titled
- Fire alarm or security status
- How much to rebuild the property at today’s price (or market value)
- Any break in or thefts in the last 5 years
- Have the buyer made any claims in the last 5 years
- What type of material is the walls made up of?
- What type of material is the roof made up of?
- If there are asbestos then this constitute a higher risk policy
- The year the building was built
List of the Best Landlord Insurance Companies
There are a number of companies selling landlord insurance policy. Most of these are household names and you should know that when you buy a policy from Woolworths or Australia Post, they are the distributor to underlying policy which is underwritten by a reputable insurance company (such as Allianz). They are simply leveraging their household name recognition to sell policies.
- Australia Post
- Budget Direct
- Real Insurance
- Virgin Money
- Terri Scheer
- Commonwealth Bank
- Travelers / Citibank