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australiankev

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Posts: 6
Reply with quote  #1 

I posted in another forum about the landlords insurance in Australia asking wher anyone has any thoughts.  I am an Expat Australian and moved to the United States in 2007 and have over time acquired a few investment properties.  I still have investment properties in Australia and and have Landlords Insurance, which cover loss of rent incurred by Landlords caused in essence through non payment of rent by the tenant. I was very surprised when I moved to the US to find out that no such product exists here .

 

In short the product covers rent default caused through the following :

 

Event

Policy Limit

Legal eviction of the tenant following a court order (tenant mounts a legal fight)

Up to 6 months

Tenant stops paying rent owed and has been issued with the appropriate notices

Up to 6 Months

Departure without notice

Up to 3 months

Hardship of a tenant - the tenant obtains a court order cancelling the lease agreement

Up to 3  months

Death of a sole tenant

Up to 3 months

Legal expense limit

$ 1,000

 

The way it operates is that cover is provided in excess of the deposit held. So if for example the tenant just stops paying rent or disappears the deposit generally covers the first month’s loss and then this policy will step in and pay the rent for another six months while the Landlord either evicts the tenant or secures another tenant.

 

Its really as simple as that and costs about $ 250 a year.

 

In Australia there are 1,000,000 residential investment properties and over half have this insurance including me on the properties that I own, has anyone heard of anything similar here, or do you think there would be interest ?

 

 

 

duramerica

Registered:
Posts: 2
Reply with quote  #2 
In the US coverage that is that broad does not exist. The closest thing to it would be loss of income but it needs to be endorsed onto the policy. There are many carriers that offer insurance quotes with this coverage.
australiankev

Registered:
Posts: 6
Reply with quote  #3 

Well apparently this will be available at the end of the year at a cost of $ 250 for a rent of $ 1,250 ranging up to $ 425 or so for rents up to $ 3,000.

Most general insurance forms cover loss of rent following an insured loss (fire etc) however pure rent default is not covered.

This policy will pay the loss immediately following the deposit being exhausted so in effect the landlord has no interruption to their cash flow. The benefit for legal expenses is exclusive to the deposit so will pay from dollar 1. Following are the perils covered.

Event

Policy Limit

Legal eviction of the tenant following a court order (tenant mounts a legal fight)

Up to 6 months

Tenant stops paying rent owed and has been issued with the appropriate notices

Up to 6 Months

Departure without notice

Up to 3 months

Hardship of a tenant - the tenant obtains a court order cancelling the lease agreement

Up to 3  months

Death of a sole tenant

Up to 3 months

Legal expense limit

$ 1,000



So a scenario may be you get a phone call saying the tenant has stopped paying rent.  Immediately you use the deposit to ensure that your cash flow is not interrupted and then lodge a claim.  At the same time you issue appropriate notices to tenant.  If tenant does not pay your insurance policy will pay the rent to you while you evict the tenant on a month by month basis for another six months.  Additionally the insurance policy will assist in the legal costs up to $1,000.

Nett affect of all this is that you loose nothing and continue to receive a rental income stream while you manage the tenant out and find a new tenant.

Basically guaranteeing that you do not have an unforeseen loss to your cash flow.

This policy has been in effect for over 20 years in Australia.  Of the 1 million residential investment properties there nearly 40% have this policy.

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