I have a view on insurance that may be a little different to many people. There are only two situations where I recommend holding insurance. The primary one is when you cannot financially afford to rectify an unexpected loss. Good examples of this are building, third party motor vehicle, public liability, professional indemnity, life (when you have young children) and often motor vehicles and home contents insurance. When you can replace items without a lot of monetary pain, then I recommend self-insurance. Also, there is little point in insuring an object, such as an artwork or heirloom that cannot be replaced or, if lost or destroyed, you probably won’t end up repurchasing.
The other situation is when an insurance company would describe you as a ‘bad risk’ which indicates the policy holder has an above-average probability of making a claim. You might be sickly, clumsy, a poor driver or choose to own property on a flood plain, or in a bushfire prone or high crime rate area.
With all this in mind, I am ambivalent about recommending Landlord Insurance to clients. On the one hand, there are some excellent policies that cover virtually every possible negative outcome with a low excess and at a reasonable cost.
Conversely, our clients own an investment property located in an affluent suburb, where occupants pay a premium to reside. Recently, I’ve described how the Marriott Lane team excel at placing superior tenants swiftly. Our property managers are vigilant in establishing whether the tenant is of good character and has the appropriate financial capacity. This results in Marriott Lane overseeing very, very few rental defaults and damaged properties. Of course, there is always the possibility of accidents, bad luck and severe reversals in the fortune of a tenant that can lead to accidental or malicious damage or lost rent due to death and domestic violence etc. Some of these outcomes can be very expensive. Major fires and the remediation of Bio-Hazards and Meth Labs are some examples where the costs can exceed $20,000.
So, you can see why it’s not a simple decision whether to self-insure or not. If your choice is to be insured, then a good option is EBM RentCover. It is a comprehensive policy and, in our experience, they are more than fair in their claim’s dealings. As a guide, for rent up to $1,500 per week, their current annual premium is $548.00. (Marriott Lane receive a commission of $22.00 incl. GST).
There are other fine alternatives including AON and Honan. I strongly recommend that you do not engage one of the large general insurers as they are often reluctant and slow payers. The specialist Landlord Insurance companies cannot afford to create a poor impression to real estate agents, who are their main source of business referrals. The other, often bigger, companies appear to not care much if their client or the real estate agent is unhappy.
To be clear, I am not recommending that you avoid Landlord Insurance. On the contrary, for many it will be a pragmatic, comfortable, tax deductible decision. The decision is yours.