How Good is Rental Property Protection Insurance

[DaveP]

Hi,
Could anyone advise me of the the sucess and pitfalls of IP Rental Property Protection Insurances.
The insurances I am interested in are: -
Not paying Rent
Massive damage to IP by tenants

I am aware you can seek compensation through RTA and small claims but having an insurer to handle the recovery costs might be nicer.

Any recommendations on good insurers would be nice.

Thans in advance

Dave P
"Its all about a lifestyle"

 

[Lissy]

Hi DaveP
I've always had landlords insurance, and to my amazement I've had to make 3 claims over the last couple of years - all basically due to lost rent, for whatever reason.
I definitely wouldn't be without it!!!!
My policies are through the property manager, I'd have to check and find out what companies.
The main pitfall with these is that in most cases, you don't receive a payout until the incident is "complete".
This means that you may have to continue to pay a mortgage for a number of months while your property manager goes through the process of evicting the current tenants, cleaning the property and finding new tenants.
The good thing is that once the claim is complete, by insurance industry standards (and assuming your property manager is on the ball!) you usually get paid within 4-6 weeks (well, I have...).
I'm not sure if this process differs in any way for investors who manage properties for themselves.
Also, be aware that going through RTA etc you can mostly only recover the bond. With insurance you can recover a lot more if necessary.

 

[asy]

Someone I know had cause to apply for insurance for one property recently, and it was paid out in full within 2 weeks, which was pretty impressive. The amount was around the Thousand dollars...

However it is an interesting question...

Whenever I have spoken to ppl about rent insurance the replies vary according to the number of properties they own...

It seems that the more properties you own, the less ppl seem to have landlords insurance.

One person said that if you have enough properties they become their own landlords insurance, meaning that the surplus from the others pays for the loss on one.

Not sure if I agree, but there you have it.

asy

 

[beech]

gee Asy you would think the more property they had,the more reason for claims/dramas they would have had.

Therefore the investor would never not have insurance.
How bizarre.

Darren

 

[Lotana]

The following reasoning can logically support Asy’s observation. Insurance companies are in the business of making money on each product, including landlord's insurance. This means that total amount of premium collected exceeds policy payouts plus operating expenses. Let's consider the extreme case an investor owning all the properties insured by ZZZ Landlord Insurance Pty Ltd. The investor would definitely be out of pocket if ZZZ priced the product correctly. I think large investors think along these lines: if I have many properties and my portfolio is diversified geographically and by market segment, if I insure all my IPs on average I would lose. It's almost like placing equal bets on all horses in the race.

Cheers,

Lotana

 

[asy]

Darren, you are right, on first consideration..

I thought the same thing. I thought that the more "savvy" they were, the more likely they would be to be fully insured..

But, as Lotana says, the more properties, the more they sort of 'self insure'.

Don't misunderstand me, I am NOT advocating this line of thought, you would have to do your own sums, and see if it suits you.

I was just offerring it as an observation and for comment!

asy

 

[DaveP]

What About getting the Tenant to Insure

Just a novel idea..thought I bounce past some of the brains....

Maybe you could set up some additional performance bond system on all your IPs whereby they pay a small premium for Insurance..which maybe the Landllord could self insure...

Just a thought

Dave P
"Innovation leads to an improved lifestyle"