Landlord insurance is not on the radar of most investors but having one can solve a lot of your headaches as a landlord.
Director of Metro Homes Realty
Berhad and Propdone Sdn Bhd.
When it comes to insuring their homes, most Malaysians only insure because it is one of the mortgage requirements. For strata- titled properties, building insurance is included in your owners’ corporation or body corporate fees, so owners just need to ensure they have adequate cover for their property’s contents. Even then, most owners choose not to do so.
One specific type of insurance is not on the radar of all property investors – but it should be.
Landlord insurance covers property investors for a variety of events that can result in a financial loss to you.
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 apply during avll periods of vacancy.
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. This is available for bot commercial and residential properties.
2. Rent default and theft
Unfortunately, sometimes a tenant’s financial or personal circumstances change and they can morph from an ideal tenant to a worrisome one.
Sometimes, they may just stop paying the rent for 2 months and more with all sorts of excuses and then by the time you manage to contact them, they would already have left the place with a lot of outstanding utility bills such as TNB, Syabas, IWK and telephone bills.
A landlord insurance policy can cover you for rent defaults in such a situation.
It can also provide coverage for theft by tenants who took some items with them from your partly or fully furnished unit.
3. Malicious damage
During your property investment journey, your portfolio 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 to your property that is not normal – which in fact amounts to malicious damage or vandalism.
Perhaps your tenants hosted a party that went out of hand and significant damage to the walls was sustained, or the children of the family bore holes in the wall for reasons only known to themselves, etc.
In that instance, unless your tenants are prepared to pay to have the damage remedied (but 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 the outstanding rent is the first step by the landlord. However, for a layman landlord to engage a lawyer and pay for the professional fee might not be as simple as we can imagine.
The landlord insurance policy can provide additional cover for legal expenses that are incurred in remedying an issue with a tenant, such as issuing a letter of demand (up to twice a year).
5. HomeFix
Older buildings also face situations such as burst pipe, burglary resulting in spoilt door locks, etc. With a small premium of under RM100 per annum, you can cover the above risk and have peace of mind especially if it is an investment property where you are not staying nearby.
The coverage will come in handy and reduce the argument on the cost of repair between the landlord and tenant.
6. Mortgage loan installment protection
Mortgage loan installment protection is a coverage for Malaysian landlords whereby in the event the residential properties are deemed temporarily uninhabitable or the landlord sustained accidental death or permanent disablement, the insurance will kick in to cover a 6-month mortgage installment. (There are some similarities with personal accident insurance but the benefit here is limited to cover mortgage only.)
7. Public liability
One of the most significant benefits of landlord insurance is its public liability coverage especially commercial properties or properties with a common area.
Most policies should provide cover, which insures you against events such as injury or death that occurred at your property.
This will cover you as the owner if the tenant or a visitor injures themselves at your property and decides to take legal action against you.
Small Price
As seen above, the 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 policy covers you for the basics, plus any additional extras like flooding, etc.
While landlord insurance policies do vary, coverage usually only costs a few hundred ringgit a year, which is a very small price to pay for peace of mind, don’t you think?