I recently received a question from one of my subscribers…
I have a question that I have noticed no one is bringing up since Covid started. My husband and I have just purchased our first investment Property late last year, we renovated it fully but since Covid has happened, we are unable to get landlord insurance, which means no insurance if the tenants don’t pay rent or damage the property.
My question is how are people purchasing investment property in these times with Covid and not getting insurance, are people just willing to risk it?
We still haven’t put our property up for rent for this reason. Can you shed some light on this topic and what are your thoughts?
These are great questions and one that is playing on the minds of many investors. When the government announced that no tenant could be evicted as a result of losing their job during COVID, I immediately picked up the phone and rang my expert Insurance Broker.
Like many of you, I was worried about having a bunch of my properties, potentially not receiving rent as a result of COVID however I was relieved to learn that if you had an existing landlord policy prior to COVID, then you are covered.
Then the insurance companies panicked and changed the rules. For any new policy, insurance companies will not cover landlords should the tenant stop paying as a result of losing their job due to COVID.
There are many investors who have purchased a property after this change and are worried, in which I completely understand. So, I want to clear things up to ensure you know where you stand when it comes to landlord insurance.
Landlord Insurance is still available!
If you take out a policy right now, here is what is covered:
Building – this includes removal of any rubbish/debris, any professional fees, authority fees limit, and mortgage discharge costs.
Contents – this includes standard and total contents sum insured such as carpets, window coverings, paint, flooring etc. It also includes removal of any debris but is limited.
Flood cover included in the policy
Loss of rent – this is where you need to be aware… this includes loss of rent for a maximum weekly rent of $1,000, loss of rent up to 52 weeks with a limit of $52,000, however…
Insurer will not pay for:
Loss of rent arising from or in any way connected with the existence or suspected existence of any infectious disease defined as a listed human disease under the Biosecurity Act 2015 (Cth) and subsequent amendments or replacement legislation.
Liability – sum insured $20,000,000
Malicious damage – or act, theft, attempted theft, burglary or accidental loss.
Therefore, you can still get Landlord insurance for your properties, but you won’t be covered for COVID. Landlord insurance is mandatory in my book and I would never rent a property without insurance.
How do investors mitigate the risk of tenants not paying the rent?
You need to make sure you get your Property Manager to be thorough in their investigations of potential tenants. Just last month, I rented a property within 2 weeks of it being on the market. The property manager made sure that the employment the tenants had were ‘covid proof’ as to limit the risk of them not paying the rent.
So make sure you do the research on the tenants in the first place to ensure you are not at risk of not receiving rent. If the tenants do any damage or leaves without paying, then you’d be covered under normal conditions of the landlord policy.
However, if you are stuck with a tenant not paying the rent, try and negotiate a payment plan however you can’t do this in Victoria. Also, the Government has designed a mediation body channel through consumer affairs to deal with any issues.
So, to answer this question, you can get landlord insurance to cover you so you don’t need to feel at risk. I’d like to encourage you to put your property on the market, do extra research on the potential new tenants and keep a buffer in place should anything untoward happen.