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3 of the most common BMT landlord Insurance claims

BMT Insurance — Wed, 20 Dec 2023 06:15:53 +0000

Landlord’s insurance is a type of insurance specifically designed for individuals who own and rent out residential or commercial properties. It provides coverage and protection for landlords against various risks and potential liabilities associated with property ownership and rental activities. Things don’t always go to plan and claims are submitted to insurers to fix or replace assets damaged by tenants, bad weather or to recoup losses of rent. BMT Insurance has listed the top three claim types to be aware of when owning an investment property. 1. Water damage/ Storm Damage Water damage makes up 46 per cent of claims which can be described as ‘escape of liquid’. This includes items such as leaky pipes and wet areas sealed incorrectly resulting in mould and damage to adjoining walls, flooring, and carpets. Storm damage and water coming in from storm damage via cracked roof tiles also contribute highly to claims made by clients. If a claim of this nature is denied by an insurer it’s generally due to a lack of maintenance or poorly fixed assets (such as roof tiles). Having a documented maintenance schedule in place is essential to provide documentation that your property is well maintained. 2. Accidental damage/ tenant damage Tenant damage makes up 33 per cent of claims. Tenant damage can occur to the property either intentionally or unintentionally, this could be accidental damage or malicious damage, or damage that’s deliberately caused but without malicious intent. Accidental damage can be almost anything. Some examples include spills on carpet, hot pans burning and marking counter tops and holes and cracks in walls. Deliberate damage is something the tenants have done deliberately but not with malicious intent, like hammering nails into the wall to hang pictures. Malicious damage can be actions from tenants such as kicking holes in a wall or throwing paint on carpets. Not all landlord policies are equal and not all policies cover accidental damage. To ensure accidental damage is covered you will need an accidental damage policy rather than a listed events (also known as defined events, events listed) policy. With accidental damages being a major claim type, an accidental damages policy ensures broader coverage. 3. Loss of rental income The third most common landlord insurance claim is loss of rent which makes up 17 per cent of total claims. Loss of rental income can occur for various reasons, such as, when a tenant defaults on their rent and abandons the property. In other cases, if a claim has resulted in the property becoming uninhabitable due to damage or ongoing repairs, loss of rent may be claimable. Fair wear and tear and damage over time Landlord insurance policies will often exclude fair wear and tear and damage caused by not maintaining the property. It’s important that landlords understand property maintenance is essential and landlords’ insurance is not a substitute for appropriate maintenance. For instance, if stormwater entered your investment property which resulted in damage, your insurer may refuse to pay the claim if the roof has cracked or has missing tiles as this may have caused more water to enter the property than if the roof was better maintained. Here are some basic items for a maintenance schedule (this is a guide and shouldn’t be assumed as professional advice). Maintenance schedule: Electrical fittings and equipment HVAC Systems All wet areas – toilets/ showers/ baths/ sinks (including the sealing, grouting and moisture behind tiles) Plumbing Building interior – floors/ ceilings/ walls/ doors/ infestation Building exterior – roof/ paint/ railings/ gutters/ driveway/ pathways/ trees/ shrubs/ windows Smoke detectors Alarms Landlords should consult with specialised insurance brokers, such as BMT Insurance who can ensure they’re correctly covered for any potential scenario. Our expert team has a wealth of experience in the insurance industry and access to a range of construction cost data through our Quantity Surveyor specialists. This data has been developed over a twenty-year period and is continually refined to reflect the dynamic construction industry. To learn more about BMT Insurance and how they can help you with your landlord insurance claims, contact the team on 1300 268 467 or Request a Quote.

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Your landlord insurance questions, answered

BMT team — Mon, 17 May 2021 00:23:28 +0000

Taking out an adequate landlord insurance policy is one of the most important things for any property investor. You might get lucky and never need to use your policy, but there is no way to know this before the fact. BMT Insurance brokers specialise in finding policies designed for landlords just like you. Here are some of the most common questions they get asked regarding landlord insurance policies. 1. What is landlord insurance? Landlord insurance covers property investors for the risks associated with owning a rental property. This includes the environmental factors that could damage the property, like natural disasters. ‘People-related’ risks are also covered, such as tenant damage. 2. When do you need landlord insurance? You need landlord insurance as soon as the property you own becomes an investment. This includes the period where you are on the hunt for tenants as the property is ‘genuinely available for rent’. 3. What is included in landlord insurance policy? Each policy varies, but common items covered include: Natural disasters Damage from impact (e.g. fallen trees) Legal liability Theft Loss of rental income Rent default Tenant damage Legal expenses of taking tenants to court. 4. Is landlord insurance a legal requirement of renting a property? It’s not a legal requirement but is highly recommended. Just like any optional insurance coverage, landlord insurance covers you for factors that are out of your control. Without it you can be faced with a hefty expense that could result in a failed investment. 5. How is landlord insurance different from regular homeowner insurance? Landlord insurance and homeowner insurance are both designed to protect your property, but each are designed with different risks in mind. Homeowner insurance is designed for you and your items in your home- it doesn’t include cover for any landlord related risks such as tenant damage. On the other hand, landlord insurance is specifically designed for the risks associated with renting out your property, such as loss of rental income. 6. What is sum insured? By definition, sum insured is the maximum amount you can claim for any one insured event. This basically means your sum insured should be enough to cover you if the property had to be knocked down, cleared away, and rebuilt to the same standard. It’s essential to ensure your sum insured is fit-for-purpose. This means regular reviews of your policy to avoid being underinsured, which can result in you being out-of-pocket in the instance of an insured event occurring. 7. Does landlord insurance cover pet damage? It depends on the insurance policy – each one is different. However, it’s recommended to go with a policy that covers pet damage if you’re going to accept pets. Some policies may specify that a pet must be on the lease for related damage to be insured. This means communication is key with he tenant so there is no misunderstandings on whether a pet is allowed at the property. 8. How expensive is landlord insurance? There’s no one-size-fits all approach when it comes to determining the premium of a landlord insurance policy. Just some factors that an insurance company will look at when determining your premium include: Property type and location The contents you own within the property Additional inclusions Your claim history Property value and it’s replacement cost The structure and security of the property Nature of the investment, for example if it’s a short-term or long-term rental. 9. Does landlord insurance cover me if my tenants stop paying rent? Some landlord insurance policies include ‘loss of rent’ or ‘rent default’ cover. Loss of rent covers the situation where the tenant stops paying rent due to the property becoming partially or totally uninhabitable. For example, if the property experienced flood damage or was destroyed by fire. Rent default cover you for the situation where a tenant stops paying rent on their own accord. This could be for a number of reasons such as employment changes, illness or your tenant breaking their lease early and not paying the missed or remaining rental repayments. 10. How can I make sure that I have the right level of landlord insurance? Speaking to an insurance broker is a helpful way to ensure you have the adequate level of insurance. They will liaise directly with the insurers for you to discuss policy options and come back to you with what’s available. Our expert team has a wealth of experience in the insurance industry and access to a range of construction cost data through our Quantity Surveyor specialists. This data has been developed over a twenty-year period and is continually refined to reflect the dynamic construction industry. To learn more about BMT Insurance and how they can help you with your landlord insurance needs, contact the team on 1300 268 467 or Request a Quote.

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What insurance do you need if a tenant stops paying rent?

BMT team — Fri, 16 Apr 2021 05:44:07 +0000

Different investment types have different levels of risk and return. Investment properties carry their own unique risks when you consider the potential for property damage and tenant-related issues. Perhaps the biggest risk is that a tenant suddenly stops paying rent, halting your cash flow in its tracks. A tenancy agreement will outline what happens once a tenant has stopped paying rent and the processes that must be followed. But there is a way to ensure this doesn’t have a detrimental effect on your cash flow: landlord insurance. In this article, we will cover: What is landlord insurance Difference between loss of rent and rent default Should you have loss of rent or rent default cover? What is landlord insurance? Landlord insurance protects investment properties. While each policy differs, landlord insurance generally covers events like natural disaster, legal liability, theft, damage (both tenant and non-tenant related), legal expenses, loss of rental income and rent default. On the surface, ‘loss of rental income’ and ‘rent default’ appear to be the same thing. But in reality, they’re not and this assumption could lead to underinsurance. Sometimes a policy may include one and not the other, so it’s essential to always read the fine print. Difference between loss of rent and rent default It’s important to understand the differences between loss of rent and rent default. Failing to do so could mean you’re out of pocket if your tenant stops paying rent. Policies can differ greatly, but here are the essentials to know about both. Loss of rent covers for the loss of rental income if your investment property is deemed partially or fully uninhabitable due to an insured event. Loss of rent cover may be required after natural events such as flooding or fire. This could include damage not directly made to the property, for example street damage following a natural disaster that causes inaccessibility to the property. Depending on the policy, loss of rent cover could be paid up until the property becomes habitable again, or up to the policy limit (e.g. 52 weeks). Rent default covers you if a tenant stops paying rent. This often happens due to unforeseen circumstances on the tenant’s behalf such as reduced income, losing a job, illness or even death. Even with the most comprehensive tenant vetting process in the search, you can’t predict the future and you may be in the situation where the tenant stops paying rent. Rent default cover can provide that peace of mind you need for these unknowns. Should you have loss of rent or rent default cover? The ideal situation is to be covered with both. Doing so means you will be covered for any unexpected situations that could cause your cash flow to cease – whether it be tenant-induced or macro factors. You can make the process of finding the best-suited insurance policy easy with an insurance broker. They will discuss the coverage you want and find options you can choose from. Our expert team has a wealth of experience in the insurance industry and access to a range of construction cost data through our Quantity Surveyor specialists. This data has been developed over a twenty-year period and is continually refined to reflect the dynamic construction industry. BMT Insurance is an expert in the area and works with reputable insurance providers to find a suitable insurance policy for you. In the event of a claim, the team can also manage the process end-to-end. To learn more about BMT Insurance and how they can help you cover your investment, call the team on 1300 268 467 or visit their website.

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What is landlord insurance and is it more expensive than homeowners

BMT team — Sun, 24 Jan 2021 23:20:07 +0000

Maximising returns from investment properties is essential. Protecting your investment is just as important. Investors new to the property scene are sometimes wondering if landlord insurance is more expensive than homeowners. The answer isn’t necessarily straightforward, or a ‘yes or no’ answer that most are looking for. This is because insurance is a complex product, and several individual contributing factors can impact an individual’s insurance premium. In this article, we will cover: What is landlord insurance? Why landlord insurance is essential for investment properties 3 tips when searching for a landlord insurance policy What is landlord insurance? Landlord insurance is a type of insurance the covers an investment property’s structure and any contents owned by the landlord (e.g. carpets, blinds, dishwashers). Some landlord insurance policies include added protection against tenant damage, loss of rent and rent default. While insurance policies vary, the table below provides an overview of the difference between the insured events generally covered. If landlord insurance includes extras like loss of rent, then why isn’t it automatically more expensive than homeowners? It’s ultimately like comparing apples and oranges. An owner-occupied home that has thousands of dollars’ worth of loose assets (i.e. furniture, personal belongings) can’t be compared against an empty investment property even if the property itself is of similar value. If you used the hypothetical of comparing the identical, completely empty property then it is possible for landlord insurance to be more expensive than the homeowners option. But realistically this isn’t possible as an owner-occupier wouldn’t live in an empty house. The key takeaway here is that homeowners is designed for you and your belongings in your home. While landlord insurance is specifically designed for investment property and the risks they face. There are a lot of different sections of cover in insurance policies that just don’t apply for both. For example, if you’re electricity failed and all the food in the fridge spoiled, you can’t claim this spoilage on an investment as you don’t live there but you may be able to with homeowners. The same applies to temporary accommodation if it’s required following an insured event. Why landlord insurance is essential for investment properties Like any investment, rental properties are exposed to risks. Even with the most reliable tenants, the unexpected can always happen. If you don’t hold an adequate level of insurance, you could be out of pocket by thousands of dollars in the event of claim. Not holding landlord insurance also poses the risk of not being covered for the right type of legal liability. For example, homeowners insurance generally has an exclusion to legal liability if the property is used for any ‘business use’, and as an investment property makes income this can be classed as business use. Therefore, if you held homeowners insurance on an investment property you may not have liability cover if someone were to get hurt on the premises. Despite off of this, research suggests that approximately 83 per cent of properties are underinsured. This could be reasons such as not holding the right type of insurance (e.g. only holding home and contents but not landlord) or having the right type of insurance, just not enough. 3 tips when searching for a landlord insurance policy 1. Understand what you need insurance for Is your investment property a short-term or holiday rental, long-term rental, shared accommodation or in a strata complex? There’s no ‘one size fits all’ approach when it comes to insuring property and the first step is always to have what you need to be insured for. For example, a short-term rental such as a holiday home leased for three months of the year doesn’t have the same insurance needs as a long-term rental. 2. Analyse different policy options The cheapest option isn’t always the best and it’s essential to know your options. Know what you are and aren’t covered for, read the fine print and feel comfortable knowing you are covered if the unexpected happens. An insurance broker can assist you in finding an adequate policy, helps you throughout the process and can manage any claim process that may arise. 3. Know the property’s replacement cost Your property’s replacement cost is essentially how much it would cost to completely rebuild your property. This includes factors such as the cost of construction, considering the site constraints, cost changes over time, demolition costs and the removal of hazardous materials. Knowing this will inform how much insurance cover you will need. This is especially important if you’re turning your main residence into an investment property and making improvements before leasing it out. Any improvements, whether due to damage or simply renovating will add value to the property and your insurance coverage must reflect this. BMT Insurance is committed to protecting investment properties with the most suited insurance policy. BMT Insurance works with policy providers and uses extensive construction cost data to ensure the right level of coverage. To learn more about BMT Insurance and to get an obligation-free quote, call the team on 1300 268 467 or Request a Quote.

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Claiming depreciation following a disaster

BMT team — Thu, 12 Nov 2020 00:49:24 +0000

There is no doubting that natural disasters have rocked Australia in 2020. It’s key that property investors know how they can deal with the destruction of their rental property from a taxation and depreciation point-of-view. How and if this can be done largely depends on the insurance proceeds received following the disaster. In this article we will explore: Depreciation with no insurance claim Capital works deductions when insurance claim is made Plant and equipment depreciation when insurance claim is made Rollover relief for plant and equipment assets Insurance proceeds and repairs Depreciation with no insurance claim When there’s no insurance proceeds the property owner can claim depreciation deductions on the new structure and plant and equipment assets once the property has been re-constructed. The owner can also immediately write-off any qualifying un-deducted values on the destroyed assets in the same financial year. Capital works deductions when insurance claim is made Insurance proceeds relating to the structural element of the property will reduce the claim available on any un-deducted division 43 left on the original destroyed structure. Future division 43 deductions will then need to be established. This is done by considering the possible capital gain and any additional insurance proceeds remaining after these adjustments. Another key consideration is how the insurance proceeds were received, for example as cash or as asset replacements. These must be considered in conjunction with other factors under subsection 124B of the Income Tax Assessment Act 1997 (ITAA 97). Plant and equipment depreciation when insurance claim is made The plant and equipment assets destroyed will be subject to a balancing adjustment event. This is where insurance proceeds will be either assessable income if proceeds exceed the un-deducted written-down value, or, deductible if the proceeds don’t exceed the value. It’s common for insurance proceeds to fall into the ‘assessable income’ category as the new plant and equipment asset will usually have a value higher than the older asset’s un-deducted amount. Rollover relief for plant and equipment assets The Income Tax Assessment Act 97 (ITAA 97) covers the involuntary disposal of assets under rollover relief. Depending on the individual scenario, rollover relief may be available. This is introduced when insurance proceeds are higher than the un-deducted values and allows the owner to offset the cost of replaced assets. This effectively reduces the assets ongoing depreciable value, rather than being assessed on the excess from the balancing adjustment and becoming assessable income. When eligible for rollover relief, the owner may end up with a new asset that has a similar opening value as the written-down value of the destroyed asset. Insurance proceeds and repairs Depending on the situation, a portion of the insurance proceeds may relate to deductible repairs to the investment property. For example, if only part of an external cladded wall suffered smoke damage and the owner only had to fix this part of the wall and the rest remained, proceeds would then be classed as assessable income can be claimed as a deductible expense. To ensure they are correctly informed on all tax benefits and liabilities, it’s key to consult with an accountant and a specialist quantity surveyor.

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