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Common Mistakes Property Investors Make

Mistake Three- Inadequate Landlord Insurance

Tenant Performance Can Never Be Guaranteed

Like any investing where we seek a financial return, there is a risk that an unexpected financial loss may occur.

Unfortunately in property management even the best tenants can have an unexpected change of circumstances that can result in rent outstanding and in extreme cases- eviction.

Most property investors understand this risk and therefore take out landlord insurance as well as building insurance to cover against financial loss like rent default, malicious damage and other tenancy related losses.

Be Aware of Landlord Insurance Through the Bank!

When a property investor takes out a loan, in a lot of cases they are also offered the convenience of landlord insurance by the financial institution. In their mind they have a sense of protection that they are covered against major loss should the unexpected occur.

However, at claim time, their peace of mind is disrupted when they need to make a claim and either find they need to pay an excess between $300 to $1000 for rent default, or in fact not have an amount covered (ie- the first 4 weeks rent loss)

Get Your Landlord Insurance Through Your Property Manager

Most agencies have access to landlord insurance that normally cannot be accessed by 'an investor off the street'. All landlord insurances available through property management agencies are quite competitive and offer comprehensive cover.

The landlord insurance our agency can access (Terri Scheer Landlord Preferred Policy) gives the following protection as well as other benefits-

  • Rent default cover with no excess, being 6 weeks rent loss cover for absconding tenants and 15 weeks rent loss for evicted tenants (evicted by a tribunal order);
  • Cover for malicious damage as well as 'deliberate damage' (for example damage caused to walls by the extensive use of picture hooks);
  • Changing of locks in an eviction situation where a bailiff is present;
  • 'Tenant hardship' should a tribunal allow the tenant to leave the tenancy on such grounds.

So when you are looking at Landlord Insurance, perhaps consider these 7 important questions

Seven imporatant questions to ask your landlord insurer :

  1. Can I claim if my tenants are on a periodic lease agreement?
  2. Can I retain the bond for re-letting expenses?
  3. Does my policy cover for change of locks when an eviction occurs?
  4. Does my policy cover for deliberate damage by the tenant, tenant's family, tenants invited guests or an unknown person?
  5. What value are my contents covered up to?
  6. Can you claim the legal costs incurred for the time your property manager spends at the tribunal
  7. What are the excesses for the following:

- Loss of rent?
- Malicious Damage?
- Accidental Damage?

Property investor's need to make the right choice when it comes to the choice of landlord insurer they use, however investigation needs to take place with regards to what costs are involved at claim time and what depth of cover is given so there are not any 'hidden surprises' creating frustration and upset.

Looking at buying an Investment Property, or looking for a new property manager?

Give AdProp a call today.