The Rent Cover newsletter provided an interesting statistic last week that noted that only 40% of landlords have landlord insurance. In other words, 4 out of every 10 landlords have coverage where the rest have no protection.
Landlord insurance has a different scope of protection depending on which policy you choose. Notwithstanding this, the basic protections are:
- Unpaid rent from a tenant;
- Damage to the premises by tenant;
- Malicious damage; and
- Public liability.
It is madness for a landlord not to have insurance. Property will be, most often, the largest investment of any investor. To not protect your return on investment in terms of the rent, to not protect your asset or ensure you are not sued for personal injury, seems to us to be total madness! Yet landlords still go without landlord insurance and leave themselves liable.
Who do they then blame? Who is left to blame with insurance? Only the agent. So, agents taking on landlords without landlord insurance leave themselves vulnerable to alternative action.
Agents should not need to bear responsibility for the problems that tenants cause. There are two alternative approaches, which agents should take:
- Have as part of his or her agency requirement, that every landlord must obtain landlord insurance. This means that, the agency should refuse to take on a property where the landlord does not have this insurance.
- Make it part of the managing agency agreement that landlord insurance should be taken out, but if it is not taken out, the landlord indemnifies the agent against any action.
I prefer the first approach because it is clear-cut. This however requires some gumption and to put aside the fear of losing bad managements. If that is too much of a risk for your business, at least adopt the second approach.