Some of us make the mistake of thinking that all insurance policies are created equal - until something goes wrong, and we realise just how little our building, contents or landlord insurance actually covers!
If you haven’t had the misfortune of experiencing a property insurance nightmare yourself, then odds are, you know someone who has.
Consider the plight of Stacy Mitchell, who owns an investment property in Brisbane. His property manager called him last year with the sad news that his tenant had died in his property – and the body hadn’t been found for three weeks.
The property manager alerted the authorities and an ambulance was called to take the body away, but Stacy learnt that it was his responsibility to clean up the remainder of the “waste”.
“We had to call in the crime scene cleaners,” he says. “Then we had to get the place steam cleaned, because the steam kills the germs. So we had all of the carpets and curtains throughout the entire property steamed, and we also had someone in to power flush all of the drains, and scrub the grout and the tile with a light acid mix.”
It was a sad situation, and all in all it took seven weeks to fully clean the property, at a cost of several thousand dollars. However, the insurance payout was less than satisfactory.
“There was no payout for the first four weeks’ rent, because that was considered to be covered by the bond,” Stacy says. “And costs involved in removing the body waste were not included at all, because it wasn’t considered to be ‘an event’ – like a cyclone or a car crashing into your house – that our policy covered.”
Eventually, after haggling for a week, the insurance company agreed to cover the cost of the crime scene cleaners, but Stacy was still forced pay for the rest of the cleaning. He remains out of pocket to the tune of around $2,500, but the property has since been re-let to new tenants.
It’s a stark reminder to all property owners – whether it’s an investment or your own home – that you should look closely at the wording of your insurance, and ask the right questions before purchasing insurance.
There are several types of insurance you may need, including building, contents and landlords insurance, and it’s important that you know exactly what your policy covers.
For instance, your home contents insurance policy covers you for the value of your chattels and household items. If you experience a kitchen fire and your oven and stove is destroyed, will your policy cover you for the replacement and installation of a brand-new oven and stove – or will they pay out an amount equivalent to the value of your previous oven and stove, which was 10 years old?
You also need to consider the amount of excess that is payable on your policy in the event of a claim.
“Some policies might appear to offer good value for money, but after factoring in excesses and other expenses, it might cost you more in the long run if you have to make a claim,” says Terri Scheer Insurance Manager, Carolyn Majda.
There are also specific risks associated with owning a rental property and these risks are generally not covered by a standard home and contents insurance policy.
So, if you own an investment property, make sure you have an adequate landlord’s insurance policy that covers things such as malicious or accidental damage by tenants, legal liability for occurrences on the property that cause death or bodily injury, and loss of rental income as a result of property damage or a tenant absconding.
“Uninsured landlords really need to think about how they would manage financially if they were faced with thousands of dollars worth of damage to their rental property, or were unable to re-let their property while repairs were being made,” Majda adds.