Think you have insurance, think again
Insurance is one of those necessities in life where you are damned if you do and damned if you don’t.
We pay premiums for years and never make a claim, but come the time that you do have to make a claim, you can get a nasty surprise and find that things you thought you were covered for are not part of the policy. It can be a rude shock.
Storm damage, floods or fire are common events that we assist investors and tenants with. Generally speaking, these are straightforward. The events that seem to cause the most headaches and heartaches for investors are accidental damage and insurance claims, which are a result of evicting the tenants.
All the big name insurers carry basic property and landlord insurance. However, comparing policy to policy, they do not match the industry-specific insurance companies. Most policies only cover malicious damage and not accidental damage, which are most common cases of tenant damage. Malicious damage cover is fairly standard – covering instances of vandalized retaliatory damages such as holes in the walls, broken windows or graffiti.
Accidental damage such as an iron mark on the carpet or a tear in the lino, would not be considered malicious and would not be covered under most “big name” policies. You need to ensure your policy includes accidental damage to avoid any nasty surprises if a tenant or one of their friends is clumsy in your investment property.
Unfortunately, the process of evicting a tenant in Queensland can be a long drawn out affair. It is not uncommon for this process to take 6-8 weeks. A non-urgent QCAT application generally takes 4 weeks to be heard. If a warrant for possession is granted, this has to be completed by the Police which can take another week before we can attend with Police and a locksmith to gain entry, change the locks and start assessing what needs to be done. Generally, if the eviction process gets to this point, there are often weeks of damage, repair and cleanups, but this would be rare.
Standard insurance policies do not cover cleanup costs such as general cleaning, lawns, rubbish removal etc. These costs are to be taken from the Bond.
In many policies, tenant damage events each have their own excess. For example, if a window is broken and there is a hole in the wall, there would be 2 excess amounts. Loss of rent would also be an additional excess. Landlord specific insurance policies generally cap the excess to a maximum of 2 excesses per claim.
Many policies only allow rent loss to be covered under a fixed term agreement (i.e. not a periodic lease) and after the Bond has been exhausted, which is 4 weeks rent. Remember though that the Bond is also used for the non-covered items such as cleaning and lawns so, if you do not have the correct cover, you would be looking at 4 weeks rent loss that cannot be claimed under your policy.
After arranging and facilitating many insurance claims over the last 15 years for investors, it is my opinion that industry insurers are the only option for investors. Industry insurance companies such as EBM and Terri Scheer are aware of these loopholes and ensure owners are aware of what is covered and what is not during these unforeseen events. These companies will also bundle the building and contents insurance for your investment property providing further savings.
If you would like more information on Terri Scheer or EBM please give us a call on 07 46420 007 or email [email protected]