Insurance that doesn’t Pay

29/4/2021

I’m like a broken record when it comes to Insurance, specifically Landlord Insurance.

I have written about it here on my blog, my #tuesdaytips on Social Media are constantly covering this topic as does my Client Quarterly Newsletter (Clients only, soz).

So why am I here again, out of pure frustration really?

Realistically, Property Managers aren’t inundated with work related to processing Insurance claims. It’s a good thing that claims are few and far between but it just seems that with some insurers everything is a battle.

Since COVID and the placement of the moratorium on evictions, halting landlords from evicting COVID Impacted tenants we know that insurance claims for Rent Arrears sky rocketed. Following that Insurers stopped offering new policies & have since increased premiums… I think we all understood why and the business case behind these decisions.

“Just because you have Building Insurance or other policies with an insurer, does not mean that they will be the best fit for your landlord’s Insurance”

My gripe though is more of a general one and while it might not be news to many it’s a warning to some about insurers exploring every possible avenue in which to avoid approving and paying a claim.

So that my rant isn’t an extended one here are some examples that come to mind as to why insurers have tried not to pay out legitimate claims;

Claim 1:

Rent Arrears following the Death of a Tenant.

The Period was the time between discovery and the family getting possession of the property back to the landlords

Issue:

Insurance did not want to pay the claim because we had not followed steps to chase the arrears or terminate the tenant for Rent Arrears.

We knew the tenant was deceased and terminated the tenancy under Death of Sole Tenant as per the normal processes. Insurance was not factoring in the moratorium or the fact that sending arrears notices was not necessary or very empathetic to the family.

Result:

Post some dispute resolution proceedings the claim was paid.

 

Claim 2:

Tenant Damage.
Tenant had been preparing food on the benchtops, leaving cut marks across marble.

Issue:

Insurance coverage did not cover damage that was accidental, Malicious only.

Result:

Insurance did not cover for what they called “Bad housekeeping”

 

Claim 3:

Rent Arrears COVID Impacted Tenancy

COVID Impacted Tenancy, the landlord had provided rent relief as per the NSW Govt Instructions however some months into providing relief the rent fell further and further behind. It was mutually agreed that the tenancy should come to an end. Arrears were left owing and a payment plan was not able to be negotiated.

Issue:

The Insurance policy only allows coverage of 2 weeks rent if the Lease was a Periodic Agreement, also known as a Continuing agreement.

An extremely outdated policy term that this insurer has had in place for many years but is being changed 1 month after our claim has been made.

Our argument here is that the majority of tenancies are periodic agreements after the initial fixed term has expired and more importantly, landlords and tenants do not have to renew a fixed term agreement. It’s like saying to a tenant at the end of the lease, you need to move if you don’t lock in for another year.

Result:

Pending as it goes through the Dispute Resolution process but it isn’t looking good!

 

It’s important to note that none of these insurers are specialist landlords’ insurers and more likely the companies you would use to insure your car with. Landlords should always stick to insurers that understand Residential Tenancy laws, the legalities and the limitations!

While I won’t name & shame and I can’t specifically recommend insurers It’s important that you, as a Landlord read the long-winded and PDS and ask questions.

THE PDS & Why you need to read it!

The PDS explains what actions can void your policy, how to make a claim and most important outlines what is covered and what isn’t covered. I’ve read a couple lately and while they are long-winded they make for an interesting read. If you’re going to buy a policy from any insurer, find their PDS and read it first.

I would really look at all insurers and just because you have Building Insurance or other policies with an insurer, does not mean that they will be the best fit for your landlord’s Insurance.

A policy that sounds good and is a fair price is what we look for but what they’re like when you go to claim is most important and there is plenty of info and reviews online about that.

Antonio Mesiti is the Principal & Property Manager at The Management Agency, a local Property Management specialist offering a one on one service for his Property Investor clients.

For more information visit; https://themanagementagency.com.au/about/

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