Insurance is one of those things that some people mistakenly think isn’t worth the cost. That’s why too many people choose not to take out appropriate insurance cover for their assets and incomes.
When it comes to insuring their homes, most Malaysians only do it because banks require it as part of a mortgage. And for strata-titled properties, building insurance is included in owners’ corporation or body corporate fees so owners just need to ensure they have adequate cover for their property’s contents. Even that, most owners choose not to do.
One specific type of insurance is not on the radar of most property investors – but it should be. Landlord insurance covers property investors for a variety of events that can result in a financial loss. Plus, it’s tax deductible, too.
While landlord insurance policies can and do vary, there are a number of inclusions that are usually standard or optional extras.
1. Rental loss – You can insure your investment property for loss of rent, but that doesn’t mean during periods of vacancy. (Both for commercial properties as well as residential properties with different insurance companies in Malaysia.)
Rental loss is when your property is damaged, perhaps by a storm or flood, and it is uninhabitable for a period of time.
You can insure your property for such an event, but you must be able to provide evidence of everything, including the exact rental loss that you have experienced.
2. Rent default and theft – Unfortunately, sometimes an ideal tenant can become a worrisome one, perhaps due to changes in financial or personal circumstances.
They may stop paying the rent for a couple of months, giving all sorts of excuses and then you discover they have disappeared, leaving behind a lot of outstanding utility bills.
A landlord insurance policy can cover you for rent defaults in such circumstances. It can also provide coverage for theft, such as if the tenant also took white goods with them from your partly or fully furnished prpoperty.
3. Malicious damage – Your rental property will need to be constantly maintained because of the wear and tear of tenants living in them.
Of course, tenants are protected from paying for normal wear and tear under the tenancy agreement. But sometimes, damage can be done beyond the norm – in fact, it’s malicious or even vandalism. Perhaps your tenants hosted a party that got out of hand and significant damage to the walls was sustained, or the kids dig holes in the wall for whatever reason, etc.
In such instances, unless your tenants are prepared to pay to have the damage remedied (though you’ve probably given them notice to leave anyway), you can claim for your financial loss through an appropriate landlord insurance policy.
4. Legal costs – Appointing a lawyer to issue a letter of demand for outstanding rent is the first step by the landlord. However, for a layperson to engage a lawyer and pay the professional fee might not be so simple.
Landlord insurance policies can provide additional cover for legal expenses that are incurred in remedying an issue with a tenant, such as legal cost for a letter of demand.
5. Home fixes – Older buildings face situations such as burst pipes, break-ins that damage the door lock, etc. Landlord insurance offers coverage for such risks – which is especially useful if you don’t live near the rental property.
The coverage will come in handy and reduce arguments between landlord and tenant over the cost of repairs.
6. Mortgage loan installment protection – This is coverage for landlords in the event rental residential properties are deemed temporarily uninhabitable or in the case of accidental death or permanent disablement. The insurance will cover a six-month mortgage installment or a benefit amount. (This is similar to personal accident insurance but it covers mortgages.)
7. Public liability – One of the most significant benefits of landlord insurance is its public liability cover, especially when it comes to commercial properties or property with common areas.
This insures you against an injury or death that occurs on your property. This is insurance for you as the owner if the tenant or a visitor who is injured on your property decide to take legal action against you.
The bottom line is that landlord insurance should be an automatic part of every property investor’s portfolio.
It’s always advisable to double-check the fine print to ensure the policies cover you for the basics, plus any additional extras like flooding in flood-prone areas, etc.
While landlord insurance policies do vary, they all usually only cost a few hundred ringgit a year, which is a very small price to pay for peace of mind, don’t you think?
