Confused on what insurance is needed for IP

[Suzz]

Hope this is the right section. But my partner and I are purchasing our first investment property in SA, but I am a little confused on exactly what insurance we should get. I'm looking at a few companies but getting confused because each seem to be giving different names for the insurance. Am I right by thinking we need:

Landlord Insurance - Which covers damage to contents (flooring/kitchens etc.) and rental loss in case of damage made by tenants and intruders.
Building Insurance - Which covers damage from fire, earthquakes etc.

Does that cover everything and is Terminate damage usually covered in the building insurance?

And looking at some companies, we have Terri Scheer but they only offer Landlord insurance which means we would still need to go with another company for building insurance right?

 

[Aaron_C]

Building insurance - will cover you in case the building burns down / is destroyed. It is required for the bank before they lend you any money to purchase the property. Termites will probably not be covered in most cases because in many cases termites would have been there long before you bought the property, and pre-existing conditions are not covered by insurance policies - plus lots of insurers specifically exclude termite damage from their cover.

Landlord insurance - This is just for your piece of mind when you are leasing out a property. If your tenants damage the property or leave their lease early you will be compensated by the insurer.

 

[jaycee]

Yes as Aaron said.

And I don't think it's an issue having them with separate insurers, I have it that way.

 

[Suzz]

Thank you so much for that it really cleared things up for me. I think we will definitely go with Terri Scheer for the Landlord. Is there an average on what you would normally pay for Building Insurance - Say for example a $300k house?

 

[jaycee]

I think $200-300 per annum

 

[Magnum9]

Get a quote from AAMI, they do building, contents and landlord insurance combined. Terri Scheer only pays a maximum of $500 for malicious damage, minus your $500 excess which means you get nothing if your tenant trashes your house on purpose. AAMI don't have limits, they repair to the same standard as previous regardless of cost.

 

[buster]

Thank you so much for that it really cleared things up for me. I think we will definitely go with Terri Scheer for the Landlord. Is there an average on what you would normally pay for Building Insurance - Say for example a $300k house?

Just be waryof the cheap premiums, they may be expensive if they dont pay a claim. make sure you understand what and how they pay. To get some good cover you may be looking at least $500.00 for building and content.

 

[MIW]

Hope this is the right section. But my partner and I are purchasing our first investment property in SA, but I am a little confused on exactly what insurance we should get. I'm looking at a few companies but getting confused because each seem to be giving different names for the insurance. Am I right by thinking we need:

Landlord Insurance - Which covers damage to contents (flooring/kitchens etc.) and rental loss in case of damage made by tenants and intruders.
Building Insurance - Which covers damage from fire, earthquakes etc.

Does that cover everything and is Terminate damage usually covered in the building insurance?

And looking at some companies, we have Terri Scheer but they only offer Landlord insurance which means we would still need to go with another company for building insurance right?

Correct for 2 types of insurance. Terri Scheer offer both Building and landlord insurance. I have also used JLT (Jarrdine Loyd Thompson) in the past.
It doesn't matter if they are with different insurance companies but I prefer that they specialize in property investing.
There's more information of this site so do a search on insurances and read up on it.

 

[mattysavager]

Get a quote from AAMI, they do building, contents and landlord insurance combined. Terri Scheer only pays a maximum of $500 for malicious damage, minus your $500 excess which means you get nothing if your tenant trashes your house on purpose. AAMI don't have limits, they repair to the same standard as previous regardless of cost.

Have to disagree with Magnum9 on his opinion on Terri Scheer.

Our office claims on policies through them a couple of times a month. The excess for most damage claims is $100 and the limit for damage to property & contents is usually up around the $60,000 mark. There ARE limits on rent compensation based on tenant's circumstances but our clients have found them to provide the most favourable outcome. Of course you should do your own research, I have done and I use Terri Scheer for my own IP.

I would also recommend having two separate insurers for Contents/Landlord and Building. That way you may have some overlap and if one company declines your claim, you can try the other one.

Matt

 

[Magnum9]

Read the PDS, it clearly states a maximum of $500 for malicious damage. Accidental damage is different altogether and the cover is $60,000 as you say. I know most investors starting out worst nightmare is for a tenant to trash the house like we are always being shown on Today Tonight, so we would like to be insured for this rare possibility. The fact is that with Terri Scheer you are not covered, simple fact.

I should clarify this is the PDS for self managed properties, I haven't read the others.

 

[mattysavager]

Sorry, I should have been more specific.

Terri Scheer will usually pay for carpets, repainting walls, replacing cracked sinks, cracked tiles, broken locks, broken windows etc. Obviously depending on the particular circumstances.

Usually when our clients claim on these policies, we will use any available bond money to pay first for any specific 'malicious damage', and the remaining bond on any other mainenance/repairs. Insurance will typically cover any repairs that are the least 'malicious' and loss of rent for the period. A good PM will know how to get the most out of the insurer.

Any repairs over $2000 will usually mean an adjuster comes to take a look. Anything under that, just quotes and submit the claim. There will be of course the horror stories where tenants have literally destroyed every surface, but with a good agent you can hopefully avoid these nightmare tenants.

It's definitely worth reading the PDS carefully, while one insurer may pay more generously on repairs, they may be fairly limited on their payment of loss of rent. I know of some insurers that will NEVER pay for the first 4 weeks rent, as they say this should be a bond claim, however they also won't pay for cleaning, lawns & gardens, locks & keys etc, as these are also bond issues.

Weigh up your risks carefully, but I stick by my original post.

 

[Magnum9]

Personally if a property manager told me that the quality of tenant they choose results in them making regular insurance claims, I would be considering using a different PM.

 

[mattysavager]

Well, most of our insurance claims are for accidental damage, broken windows, water leaks, storm damage, flooding etc (not really anything to do with tenant selection). Most tenants don't damage properties 'maliciously', unless you're unlucky.

And with around 1000 rental properties on our books, that could help to explain the frequency

 

[Magnum9]

Thanks for the clarification, seems like the statistics aren't as bad as the "current affairs" programs would suggest.

 

[mattysavager]

What

Current affairs programmes aren't telling the truth? Hehe.