March 13, 2011
Louise Mercer’s investment property was trashed and she had no insurance
Louise Mercer learnt the value of landlord insurance the hard way. She thought she had taken out landlord insurance on an investment property, before her tenant decided to stop paying rent.
It was only after the tenant left the property some weeks later that Louise, who works in strategy for insurance company Suncorp, discovered the tenant and his uninvited dog had also trashed the house.
“I thought we had insurance but there was some miscommunication with the property manager at the time and we discovered there was no insurance in place,” Louise says.
Advertisement: Story continues below “We had renovated 18 months earlier and were hoping to sell it while the market was buoyant. But, instead, we were repainting the whole place, repairing doors and walls, recarpeting and getting new light fittings the tenant had wrecked.”
The loss of rental income plus the cost of the repairs came to about $15,000. Then there was the cost of flying to the property and taking time off to organise the repairs. Meanwhile, the property market in that area dropped off and the opportunity to sell was missed.
With the benefit of hindsight, paying landlord insurance of about $1000 a year would definitely have been worth it.
Depending on the contract, the policy would have covered loss of rental income from when the tenant stopped paying rent and the cost of repairing any accidental or malicious damage.
“You don’t take out insurance for insurance’s sake,” Louise says. “Insurance should be commensurate to the risk, so now that I am more aware of the risks for an investment property, I believe it is definitely worth it.”
The general manager of insurance services for Terri Scheer Insurance, Carolyn Majda, says landlords need to think how they would suffer financially if a tenant absconded or damaged a property.
“Very often the rent from a property is paying a mortgage,” she says. “If you are not getting rent, how long can you sustain the loss of rent?”
Majda says the most common claims by those who do have landlord insurance are loss of rent, malicious and accidental damage and water-related damage to carpets and lights