PM - If only I’d taken out insurance

One of Australia’s leading landlord  insurers recently settled more than 5,000 claims – with a total value in excess of $16.5 million. For the mathematically inclined, around $3,300 paid out per claim.

Of course, that’s an average and many claims were of lesser value while others were substantially more. And while many landlords would be able to ‘find’ the $1,175 one policyholder was paid to fix a broken window and other minor reparations, few could foot the $746,000 bill another landlord faced after a fire.

Owning an investment property comes with a unique set of risks – not only is there the risk the rental could be damaged due to fire, flood, storm or any number of other insured events, there are specific risks, like tenant-related damage (accidental, malicious and deliberate) and loss of rent, that also need to be factored in.

Last year alone, more than 1,300 (or 26 per cent) of paid claims were for tenant damage. This covered everything from wine spilled on carpets to homes having to be decontaminated.

A rental property is an investment from which the owner expects to derive an income. So, when a landlord suffers rental losses, it can have a devastating effect on their cash flow and personal finances – banks generally insist on mortgages being repaid, regardless of whether the landlord actually received any rent.

Almost 3,000 claims (or 58 per cent) for loss of rent were settled in one year. Sometimes the result of bad tenant behaviour (absconding, rent default, breaking leases), other times the non-payment was the result of circumstances beyond the control of tenant, landlord or agent – such as relationship breakdowns, domestic violence, job loss, serious illness, or tenant death.

While prudent landlords often factor in a few weeks each year when the property will not generate an income, unexpected damage or loss of rent frequently derails even the best plans. This is when the financial security blanket that is landlord insurance comes into its own.