We take you through what Landlord Insurance is and why your rental property should be…
By Sarah Barton, Terri Scheer Insurance Distribution Channel Manager
Landlord insurance is back.
Temporary restrictions on the sale of new policies during COVID-19 have been lifted across Australia – including Victoria – and property investors can again purchase Terri Scheer landlord insurance for professionally managed long-term rentals.
In the current environment this should be welcome news for uninsured landlords, as well as their property managers. It means landlords across Australia can protect their rental income by securing insurance cover for loss of rent and other tenant-related risks.
These risks have heightened during COVID-19 including the potentially higher likelihood of tenants defaulting as a result of widespread job uncertainty and property damage due to people spending more time in their homes.
However, not all landlord insurance policies are created equal, particularly in relation to loss of rent. Property managers should encourage their landlords to ask the following questions of landlord insurers before placing cover:
Does the policy provide cover for loss of rent?
Don’t assume landlords will be covered for loss of rent under their new insurance policy.
Some, but not all landlord insurance policies currently cover loss of rent for a defaulting tenant.
Historically, loss of rent is the most common reason for landlord insurance claims, so it’s important for landlords to confirm how much loss of rent they can claim and under what circumstances.
Loss of rental income can result from absconding tenants, defaulting payments, death of a sole tenant, failure to give vacant possession or a court awarding a tenant a release from lease obligations due to hardship.
In instances where malicious damage has been caused to a property, a loss of rental income may result during the time required for the property to be repaired and ready to relet.
Generally, conditions will apply at the time of placing cover and for landlords to be eligible for loss of rent, their tenant must not have been in arrears for more than a specified number of days within a previous specified period.
Insurance can still be placed with cover limited to other clauses, and policy holders can become eligible for loss of rent cover when their tenant is out of arrears for a specified time.
Will my loss of rent cover remain valid if I negotiate a lower rent with my tenant?
Landlords wanting to negotiate lower rents with their tenants should check with their insurer to ensure they will remain covered under their policy to the new rental amount.
Then, if a tenant stops paying rent at the renegotiated amount and vacates the property, there may be a valid trigger for a claim.
Be aware that a renegotiated rent reduction in itself is not considered a default by a tenant and the gap between the original rent and their renegotiated rent is unlikely to be covered under landlord insurance.
How does the eviction moratorium affect loss of rent claims?
In circumstances where a tenant cannot be evicted while an eviction moratorium is in effect, landlords should ask their insurer whether the unpaid rent will continue to accrue until the tenant leaves the property, which may be after the end of the moratorium.
Upon the eventual leaving of the tenant, they should be able to follow the normal processes to remedy the arrears or lodge a claim.
For further information, call 1800 804 016.
About Terri Scheer Insurance
Terri Scheer Insurance Pty Ltd ABN 76 070 874 798 (Terri Scheer) provides insurance cover for landlords, helping to protect them against the risks associated with owning a rental property. These include malicious damage by tenants, accidental damage, landlord’s legal liability and loss of rental income. Terri Scheer acts on behalf of AAI Limited ABN 48 005 297 807 AFSL 230859 trading as ‘Vero Insurance’, the insurer which issues the insurance cover. Terri Scheer has not taken into account the reader’s objectives, financial situation or needs. If you are interested in any of Terri Scheer’s insurance products, the relevant Product Disclosure Statement should be considered first. Based in Adelaide, Terri Scheer services all states, territories and capital cities.
The information contained in this article is intended to be of a general nature only. Terri Scheer does not accept any legal responsibility for any loss incurred as a result of reliance upon it.
Insurance issued by Vero Insurance. Read the Product Disclosure Statement before buying this insurance and consider whether it is right for you.