Insurance… is your policy Worth the paper it’s printed on?

Insurance paperwork

Not having your real estate investment appropriately protected is risky. Insurance can give you peace of mind and confidence that your investment property will be looked after should something go wrong.

In most cases, the buyer is responsible for the property from 5pm the next business day after the contract date, be mindful this is before the settlement date. If you have a mortgage, most financial institutions require an insurance policy to be taken out and to have their name detailed on the certificate of currency before settlement.

I recently purchased an investment property for a client and our standard process is to provide an overview of what should be a minimum requirement for their insurance policy. We then contact our preferred landlord insurance broker and arranged for them to provide a competitive building and landlord insurance quote.

Our client also obtained a quote from another insurance broker and to our surprise it came in much cheaper, almost half the price! I reviewed both policies side by side and quickly found the reason. To be more competitive on pricing the other broker simply reduced the building cover by half of the replacement value and didn’t include rent default or malicious damage cover.

To be frank, the cheaper quoted policy wasn’t Worth the paper it was printed on! The reason you take out insurance is to minimise risk and exposure, and to give you more peace of mind if the unexpected happens. This policy didn’t tick all the boxes and would leave the client underinsured.

We debriefed our client on the differences between the policies and explained the importance to include malicious damage and rent default. Luckily for our client we could review the fine print before they committed to a policy.

If you’re wondering how to estimate your building replacement value, do a quick internet google search and there are several handy building replacement calculators available that are free to use at any time.

In my 20 years of real estate investing experience, you can have a great tenant that always pays their rent on time who causes you no issues; However, tenants life circumstances can change and can impact you negatively. My advice is to expect the best from your tenants but prepare for the worst and ensure your covered by a good quality landlord insurance policy. The good news is that because insurance is an investment expense, your policy premium is tax deductible.

Got a property investment question? I’d love to help. Send me an email and we’ll set up a time to chat.

“Nadine and I would just like to thank Simon Read from Worth Property Investing for securing our first investment property. Friends of ours have gone through the process of buying property and the amount of stress they were under turned us off. When I found out about Simon, and understood what he would do for us, it was a simple decision. I did absolutely nothing; Simon handled everything and found us the perfect property which rented out above market value”
Peter and Nadine Ayres – Milperra, Sydney