Agents are no strangers to insurance – they usually seek cover for the agency premises and its contents, their directors and workers, public liability and professional indemnity, and cover for other business interruption, cyber and financial risks.
But what about your landlord clients? Are they all insured?
To help protect their asset, it is important landlords are informed about the role insurance plays in their investment journey.
Anne Crarey, Little Real Estate Executive General Manager – Property Services, says the best way to explain the value of landlord insurance is through claim examples.
“We had a tenant who stopped paying rent,” she says.
“It went on for nearly a year before we got possession, resulting in the tenant owing just over $30,000 in rent.
“When we got possession of the property there were also damages to the property, which cost close to $4500.
“We went through insurance, and they covered all the costs minus the bond, which we went to VCAT for.”
Anne also shares a time when insurance ‘could’ have saved the day.
She says she managed two properties in a building that was home to an exploding drug lab.
She didn’t manage the offending unit, but she did manage the one above and beside it.
“After the explosion, the whole building was deemed structurally unsound, and about 20 units had to move out,” Anne says.
“It took over six months to do repairs.
“One of our clients had landlord insurance and received rental income throughout that time, the other did not and had to meet her mortgage commitments without any income for six months.
“She got landlord insurance after that.”
Brendan Dirago, Director, Barry Plant, has also seen first-hand the value of insurance.
“One client faced significant property damage caused by a tenant,” he says.
“The insurance covered all repair costs and compensated for lost rental income, preventing a substantial financial burden on the landlord.
“This showed that landlord insurance is vital as it provides financial protection against unexpected events, such as property damage or rent default, ensuring landlords can maintain their investments and cash flow.”
Landlord insurance is an important financial safety net in case something goes wrong at a rental.
Depending on the policy, it can cover things such as damage caused by natural disasters like storms or bushfire, damage caused by tenants, loss of rent, and legal liability.
Landlord insurance claims are quite commonplace.
EBM RentCover, one of Australia’s leading landlord insurance providers, settled more than 5600 claims worth $49.3 million in 2023.
Alicia Lecky, Head of Property Management Services, Longview Real Estate, says as a real estate professional, she would think twice about bringing on a property where an owner wouldn’t be willing to invest in landlord insurance.
“If a landlord isn’t willing to spend money on insurance to protect their property, I question how they will respond to things like urgent repairs and maintenance requests,” she says.
“Insurance is a huge benefit to our team of property managers knowing their own portfolio is covered and if the unthinkable happens it is much easier to navigate for the owner and renter, and also ensures the agency is not at risk.”
A specialist landlord insurance policy can not only provide cover for the risks that any property may face (like storm damage, vandalism or burglary) but also those tenant-related risks like tenant damage and loss of rent.
And it’s those tenant-related losses that can see many landlords lodging an insurance claim. At EBM RentCover, close to $22.2 million was paid out for just shy of 3000 tenant-related claims in 2023 – that’s an average claim of around $7400.
“Insurance is important,” Anne says.
“But not just any old insurance. We had a property where the rental provider had insurance with a low-cost insurance company and didn’t take up additional cover for tenant-related risks like loss of rent.
“They ended up experiencing a few issues and lost about $10,000 in rent.
“Also, most of the claimed damages were rejected by the insurer.
“As an agency, we encourage our landlords to do their due diligence and compare coverage offered by different insurers so they can get the right and best coverage for their investment.”
Managing a fully-insured rent roll can save agents time, money and a measure of stress, and protect against liability.
The cost of an annual landlord insurance policy can be less than the cost of one week’s rent in some states and territories.
And the premium is generally tax deductible.
But most importantly, it’s an investment in peace of mind.
“As an agency, a protected portfolio ensures financial stability, fosters trust with clients, and allows us to focus on growth and providing excellent service,” Brendan says.
“Landlords often underestimate the risks of being uninsured or believe their property is low-risk.
“Real-life examples and details of coverage usually help change their perspective.”
If you have questions or would like to arrange an insurance audit of your portfolio, please reach out to your EBM RentCover Relationship Manager.
Not yet partnered with EBM RentCover? Contact us today – agentsupport@ebm.com.au.
