Over many years in property management, one of the most common traits that my clients all hold is a certain degree of risk aversion when it comes to their property investment strategy. Sure there is a certain amount of risk involved with any investment – but in Australia, we are lucky to consider property investment particularly low-risk, and it is generally well-known that if you can hold your property through a market correction – you will always come out on top.
Why aren’t our properties adequately insured if we are so averse to unnecessary risk?
One of the other surprising trends I have noticed is that commonly, Landlords tend to be under-insured. Worse still a large percentage of property investors don’t hold Landlords insurance and I find myself shocked when I meet a client who has a portfolio of properties and has done for many years – without holding Landlords insurance.
Specialists who provide Landlords insurance do so for only a few hundred dollars per year – sometimes less. To put this into perspective for around $6 per week, that is tax deductible, a huge amount of your risk is negated. Perhaps investors don’t understand how cost-effective the insurance policies can be – or how comprehensive they are when it comes to situations within your property that may arise.
For years now, certain insurers have offered cover for even the most unlikely of events that would put owners out of pocket huge amounts of money. Consider this – you have a single tenant in your property and the unthinkable happens – they pass away. Forgetting the emotional toll this takes on everyone involved – the financial impact can be horrendous.
You may not have access to your property, and have to deal with the tenant’s estate in order to finalise the tenancy. There could be rent owing and professional cleaning as well as furniture removal. Before you know it, the bills in these scenarios commonly sit beyond $10,000. If you had a policy that covers Death of Tenant you are able to rest easy knowing the mortgage will continue to be paid.
How about this scenario – you have a fantastic tenant who gets seriously ill, and is unable to work for a few months. They are no longer fantastic and they stop paying rent – the simple fact is that they cannot pay rent without income. In reality, it can take months to evict a tenant. There’s 14 days before we can file at VCAT, then VCAT is another process within itself – and all this while you haven’t seen a single dollar of rent. You get your property back and then need to invest in re-leasing the property and more than likely some degree of professional cleaning and/or repair. Their bond of four weeks rent will not cover the cost – or come close. A good Landlord’s Insurance Policy however would.
I’m lucky, I have never needed to claim on my Landlord’s Insurance – but I have still always had it. I wouldn’t drive a car without insurance and I won’t lease my house without insurance – it just makes sense. Within Hamilton Property Management, I educate all of my clients on the importance of obtaining quality Landlord’s Insurance and the value it may hold in the event something unforeseen occurs at your property.
At Hamilton Property Management, we partner exclusively with EBM insurance and are able to set-up policies on behalf of our valued clients – so if you’d like to discover the range of insurance options that EBM offer Landlords for their peace of mind, visit www.rentcover.com.au.
**Any advice provided is general in nature and does not constitute financial, legal or professional advice. If you are considering undertaking a review of your insurance, please consult a professional advisor/broker**
A little about the author….
Jacob Visser is an industry leader within Property Management and as the Head of Property Management with Hamilton Property Mangement offers unique insights into Property Investment and the rental market. Starting his property portfolio at 21 has allowed Jacob years of experience and he acts as a wealth of information for the fast-paced and exciting world of Property Investment. Jacob can be contacted directly on 0447 316 406.