INSURANCE is one of those things that some people mistakenly think isn’t worth the cost. Unfortunately, that’s why too many people choose not to take out appropriate insurance cover to protect their assets as well as their incomes.
When it comes to insuring their homes, most Malaysians only insure because of bank requirements in order to get their mortgage applications approved.
As for strata-titled properties, building insurance is included in the 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 property investors – but it should be.
Landlord insurance covers property investors for a variety of events that can result in financial loss.
Plus, it’s tax deductible, too.
While landlord insurance policies can and do vary, there are a number of standard inclusions.
Rental loss
You can insure your investment property for loss of rent, but that doesn’t mean during 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.
Rental loss cover is available for both commercial and residential properties.
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 rent for two months or more.
By the time you manage to contact them, they have already moved out of the rented premises, leaving behind a lot of outstanding utility bills from Tenaga, Syabas, IWK and telco companies.
A landlord insurance policy can cover you for rent defaults in such a circumstances.
It can also provide coverage for theft. If your property was partly or fully furnished, you will be protected if the tenant took white goods from the unit with them.
Malicious damage
During your property investment journey, your portfolio will need to be constantly maintained because of the wear and tear from 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 – 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.
Perhaps the children in the family dig holes in the wall for reasons known only to them.
In that instance, unless your tenants are prepared to pay to have the damage remedied (but you would probably have given them notice to leave anyway), you can claim for your financial loss through an appropriate landlord insurance policy.
Legal costs
Appointing a lawyer to issue a letter of demand for 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 simple as imagined.
The landlord insurance policies can provide additional cover for legal expenses that are incurred in remedying an issue with a tenant, such as legal costs for issuing the letter of demand.
Costs of repair
Older buildings also face situations such as burst pipes and break-ins that damage the door lock.
With a small premium of below RM100 per annum, you can cover the above risks and have peace of mind, especially if it is an investment property whereby the landlord is not staying nearby.
The coverage will come in handy and reduce the argument on the costs of repair between the landlord and tenant.
Loan installment protection
Mortgage loan installment protection is a coverage for landlords. In the event a residential property is deemed temporary uninhabitable or the landlord suffers accidental death or permanent disablement, the policy will cover a six-month mortgage installment. There is some similarity with personal accident insurance but this policy covers only mortgage payments.
Public liability
One of the most significant benefits of landlord insurance is its public liability cover, especially for commercial properties or properties with common areas.
Public liability cover insures the policy holder against events such an injury or death that occurred at his property.
This is insurance for you as the owner if the tenant or a visitor injures themselves, or worse, at your property and 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 fineprint to ensure the policies cover you for the basics, plus any extras such as floods.
While landlord insurance policies do vary, they 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?
See Kok Loong is executive director of Metro Homes Realty Bhd.
