Bad insurance policies – the last thing we think of

When any of us weigh up the merits of buying an investment property how many of us seriously look at the fine print in an insurance policy.

There is so much to consider when thinking about becoming a landlord that things like the intricacies of clauses in insurance policies become too much to deal with.   Most of us only find out what is covered when the unthinkable happens and then it’s too late.   

I started my working life in the insurance industry but to this day I still find those PDS’s, Policy Disclosure Statements, to be dry and boring diatribes that only end up in my bin.   Then a claim happens.

One of our tenants came home in the evening to find a leak under the kitchen sink.   Water had spurted out at almost mains pressure into the cupboards, floating floor boards and surrounding carpets.   But the landlord was to get more surprises than just the total bill.   And it wasn’t so much a nasty reminder of the $1,500 excess because having had this high excess over the years had saved them a lot of money; it was the policy fine print that was to come back to bite them.

The first realisation was that the building policy did not cover Temporary Accommodation for the tenant.   The house was now unliveable so the tenant had to move out.   The tenant had no insurance of their contents either which also meant they had no cover for Temporary Accommodation and now nowhere else to stay.   There is no clear obligation on a landlord to provide a tenant with a place to stay in these situations unless they were legally responsible for the incident in some way.   Legal liabilities are never clear that’s why an extra cover like Temporary Accommodation is so important.

The second nasty realisation was that the policy required us to use the insurance company’s preferred tradesman.  The result of this was we could not use the companies we knew who were expert in this field and so the house lay soaking wet over the weekend before the floating floor boards could be removed and drying started.

In the end the house was not liveable for almost 2 weeks as it was being dried out and the landlord did pay for the tenant to stay 3 days in a motel.   After that the tenant had to fend for themselves.   This whole thing created a lot of angst for the tenant which was made many times worse because they had to fend for themselves.   The relationship between a landlord, Property Manager and a tenant is crucial for a tenancy to survive the long haul and it is just an incident like this that can poison that relationship irrevocably.

The lesson here is that you should always read the fine print even though it is a dry boring diatribe.   Or, because your Property Manager is not permitted to give insurance advice, consult an insurance broker who knows what they are doing and can give you a heads up.

Ring us on 8186 2777 if you want a Property Manager that has been through it all before.