Only renewing landlord's insurance (apartment) near end of contract

[jerrybee]

Does anyone think this is a valid strategy? I've been doing it the last few years and it works well, so I'm wondering if there's any reason to change.

Basically, I only renew my LL insurance just as tenants move out. I find this is generally the most likely time for there to be issues - tenants absconding on the final payment/s, or leaving the place in a mess.

I'm curious whether anyone else does this?

 

[miss green eyes]

In other words, you are uninsured the rest of the time?

So how do you work it? You pay for a one-month contract of insurance?

Not what I would choose to do, I am insured to the hilt. However, it's your choice.

 

[arriety]

Actually I don't' think banks will loan you money for an IP unless you have LL insurance - well mine won't anyway.

 

[Salvatore1]

Jerrybee, most insurance companies wont pay you if you took out a policy when tenant was already in arrears when you took out the policy.

 

[miss green eyes]

For that matter, if you keep taking out these 'one-month' policies at the point of changeing tenants only, will an insurance company find a way to get out of paying you if needed?
You need to put your 'lawyer' hat on for this.
If you don't have one, perhaps someone on this forum can lend you theirs.
The insurance company might try to wile their way out of paying.

 

[Perp]

There are many ways in which an insurer could avoid paying out in these circumstances. It is not a good idea.

 

[brettc]

Does anyone think this is a valid strategy? I've been doing it the last few years and it works well, so I'm wondering if there's any reason to change.

Basically, I only renew my LL insurance just as tenants move out. I find this is generally the most likely time for there to be issues - tenants absconding on the final payment/s, or leaving the place in a mess.

I'm curious whether anyone else does this?

I'm hoping you don't mean this the way everyone has assumed, but not sure how else to read it. If you are uninsured at other times it will mean that if a tenant injures themselves on your property and you are sued for hundreds of thousands of dollars or even millions of dollars, then it's your problem. Or if the property is burnt to the ground during this time you're on your own?

Aside from that there is a multitude of risks you are leaving yourself open to in specific regard to the tenant, gee if only we could predict when tenant problems would occur, that in itself would be both a landlord and a property managers dream come true.

Maybe you mean something else but if this is what your "strategy" is....good luck.

 

[miss green eyes]

if it's an apartment, theoretically in case of fire strata insurance will pay.
I have mortagee protection insurance to cover my mortgage in case strata does not pay.
This does not however reimburse for loss of gain in equity ie if I bought at 200k and my mortgage is 180k but property is now worth 10 mil at today's market, I lose that gain in equity.
I do know someone personally whose house burnt down and he was ininsured. He just thought 'nothing bad will happen', so no need for insurance.

 

[handyandy]

Aren't we talking cross purposes here.

LL insurance to me to me is simply the specific policy that covers for loss of rent, internal liability, internal damage either accidental or deliberate etc.

Many poster including Brett seem to be lumping in the building insurance aspects into the equation.

I would hope that the OP still has building insurance and this is also the type of insurance that lenders insist on and want to be named on.

Cheers

 

[Perp]

LL insurance to me to me is simply the specific policy that covers for loss of rent, internal liability, internal damage either accidental or deliberate etc.

I assumed that. His actions are still invalidating his policy, on a number of fronts.

 

[brettc]

if it's an apartment, theoretically in case of fire strata insurance will pay.

If it's a Strata unit the strata insurance won't pay for your contents (carpets, curtains, blinds etc.), nor will it cover liability inside your unit. Nor of course the tenant risks.

 

[brettc]

Aren't we talking cross purposes here.

LL insurance to me to me is simply the specific policy that covers for loss of rent, internal liability, internal damage either accidental or deliberate etc.

Many poster including Brett seem to be lumping in the building insurance aspects into the equation.

I would hope that the OP still has building insurance and this is also the type of insurance that lenders insist on and want to be named on.

Cheers

If it's a strata unit the tenant risk, the contents (carpets, curtains etc.) and the liability would generally all be one. As far as cost-effectiveness it should be.

In regard to a house you could maintain a straight building policy without landlords but in a tenanted property the contents (carpets, curtains etc.) are generally regarded as not part of the building policy. Hence you require a policy that includes both or have a separate contents/landlord policy as well.

 

[handyandy]

I assumed that. His actions are still invalidating his policy, on a number of fronts.

I can see issues with his approach and doing this a number of times you would soon run out of insurance companies.

As long as the tenant is not in arrears then you can initiate a policy. Having said that if the tenant has damaged the property then it is highly probable that they are already in arrears thus too late to initiate a LL policy.

Cheers

 

[Perp]

As long as the tenant is not in arrears then you can initiate a policy.

It's not initiating the policy that's the issue; it's successfully claiming.

For a start, they generally ask you if there's anything else that they should know, and record your answer.

Not saying "I only take out a policy towards the end of my tenancies to protect myself against rent default and damage" would be sufficient non-disclosure to render the contract void. After you need to make a claim.

An insurance contract, unlike other contracts, is a contract of "utmost good faith". This means that because insurers are uniquely vulnerable to such fraudulent behaviour, the law allows them to cancel policies which involve any degree of deception or non-disclosure.

I think it's pretty obvious if you were an insurer that you'd want to know that your customer had this strategy, therefore by not disclosing it, the insurance contract could be voided.

Further, if there's any damage, you'd need pretty solid proof that it was done after the insurer took on the risk of your business, which is also probably a show-stopper.

 

[miss green eyes]

If it's a Strata unit the strata insurance won't pay for your contents (carpets, curtains, blinds etc.), nor will it cover liability inside your unit. Nor of course the tenant risks.

Yes, I know.
like insurance in case the tenant is injured due to an electrical fault.

Unfortunately LL insurance doesn't cover accidental damage.

 

[brettc]

Unfortunately LL insurance doesn't cover accidental damage.

Some policies certainly cover Accidental Damage, RentCover always has, although admittedly most policies don't. Unless you are referring to something that is specifically excluded??

 

[arriety]

I am interested in accidental damage. Can;'t believe my insurance doesn't pay for it. My tenant accidentally damaged a small portion of the lounge carpet (dropped a roast pork on it!) and the insurance said they'd pay if it was malicious damage or if I had damaged it but not the tenant! Eeek....anyway my German Phd students had their own insurance so they managed to replace the whole lounge carpet for me....nice.

 

[miss green eyes]

Arriety, talk to brettc, rentcover does accidental.

 

[vaughan]

The thing with "accidental damage" is that it's pretty close to "fair wear and tear", and fair wear and tear is an expected cost of doing business (and hence not insurable).

 

[arriety]

Arriety, talk to brettc, rentcover does accidental.

thanks green eyes - I will!