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Poll Results
 
 landlords insurance / rent default
 would you consider buying this product 0 0%
 is this a good concept 1 100%
Total votes: 1. This poll has been closed.


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Author Comment
 
australiankev

Registered: 06/15/11
Posts: 6
Reply with quote  #1 

Hi everyone. I am an ex pat Australian living here in the US and have acquired a few investment properties in PA. When I was in Australia I purchased a product called landlords insurance which covered my rental income if the tenant left without notice or went in to rent default. (it basically covered the first 6 months loss of rent and cost me about $ 250 a year).

I have been searching high and low for a similar product here and its obvious that it doesn't exist. I have a friend who works at an insurance company and he thinks it is a great idea and asked whether people would actually buy it ? I know I would but I am curious about what everyone else thinks ? It just scares the hell out of me that i may have to top up the mortgage on these properties even more without notice, thoughts ??

OHlandlord

Registered: 01/20/07
Posts: 3,537
Reply with quote  #2 

I have insurance that pays the rent if the property becomes uninhabitable due to an insurable accident, but not due to abandonment.  I suggest you do a poll of LLs in your area to see if they would be willing to pay a certain price for that insurance.  And maybe check to see if the price would change due to the location, the level of the unit (higher or lower end units), etc.

australiankev

Registered: 06/15/11
Posts: 6
Reply with quote  #3 

OK so i have managed to get further details. The cost is $ 250 per year and covers the tenant just leaving (lease default) and covers rent up to $ 1,250 per month. It also covers legal fees to evict up to $ 1,000. the premium increases based on monthly rent up to $ 400 or so for rent of $ 2,500 per month.  The deductible is one months rent. It covers 6 months loss in excess of the 1 month.  Also covers death of tenant and military transfer.........sounds like a good deal to me.

Elky

Registered: 06/14/11
Posts: 20
Reply with quote  #4 
So you pay 250 annually to get up to 1250 back per month, after the first month. So you need an empty house for 2 months in order to see any return on investment. What happens if the tenant is there but not paying rent? It sounds like the insurance isn't covering that...

Legal fees you'd have to exceed your 1 month first for it to be a profit... so you'd probably never see that $1000 in coverage depending on the income of your property.

Also you didn't mention if this covers multiple units or just one, and if it does cover multiple units does the coverage apply to all in a single month (1,250 max) or each unit (1,250 x # of units) ?

Is the increase up to $400 total or an increase of $400 (650 total)?

At least up here, death of a tenant is a 30 day process from discovery of death and can be expedited if the executor agrees. So the insurance payout would never kick in because I'd have to cover the first month anyways...

MOON

Registered: 09/16/08
Posts: 577
Reply with quote  #5 

Was that 250.00 per property? Not sure insurance comp. would offer this in a tenant friendly state as mine , I am in NJ & I would consider this insurance, but here if you use your insurance you stand the risk of loosing the insurance coverage. 

australiankev

Registered: 06/15/11
Posts: 6
Reply with quote  #6 

Well apparently this will be available at the end of the year at a cost of $ 250 for a rent of $ 1,250 ranging up to $ 425 or so for rents up to $ 3,000.

The premiums are per unit and are not cumulative in other words are a per apartment premium. In my case i own tow properties and one rents for 1,000 and the other 3,000.  My premiums will be $ 250 and $ 425 respectively.

Most general insurance forms cover loss of rent following an insured loss (fire etc) however pure rent default is not covered.

This policy will pay the loss immediately following the deposit being exhausted so in effect the landlord has no interruption to their cash flow. The benefit for legal expenses is exclusive to the deposit so will pay from dollar 1. Following are the perils covered.

Event

Policy Limit

Legal eviction of the tenant following a court order (tenant mounts a legal fight)

Up to 6 months

Tenant stops paying rent owed and has been issued with the appropriate notices

Up to 6 Months

Departure without notice

Up to 3 months

Hardship of a tenant - the tenant obtains a court order cancelling the lease agreement

Up to 3  months

Death of a sole tenant

Up to 3 months

Legal expense limit

$ 1,000



So a scenario may be you get a phone call saying the tenant has stopped paying rent.  Immediately you use the deposit to ensure that your cash flow is not interrupted and then lodge a claim.  At the same time you issue appropriate notices to tenant.  If tenant does not pay your insurance policy will pay the rent to you while you evict the tenant on a month by month basis for another six months.  Additionally the insurance policy will assist in the legal costs up to $1,000.

Nett affect of all this is that you loose nothing and continue to receive a rental income stream while you manage the tenant out and find a new tenant.

Basically guaranteeing that you do not have an unforeseen loss to your cash flow.

This policy has been in effect for over 20 years in Australia.  Of the 1 million residential investment properties there nearly 40% have this

OHlandlord

Registered: 01/20/07
Posts: 3,537
Reply with quote  #7 

Quote:

So a scenario may be you get a phone call saying the tenant has stopped paying rent.  Immediately you use the deposit to ensure that your cash flow is not interrupted and then lodge a claim.


This is illegal.  A deposit may not be touched as long as the tenant still is in possession of the unit.  A deposit may only be distributed after a tenant relinquishes possession of a unit.  You may not use the tenant's money (his deposit) to pay his rent without his consent until he leaves owing you that rent money.  Remember, that deposit is not your money.  It belongs to the tenant. 

If a tenant consents to you paying his rent with his deposit (a very dumb idea!), his rent is not unpoaid and I can't see any insurance conpany paying off on a claim that way as long as you are holding his money or as long as the rent is paid by his deposit.  An insutrance company would probably only pay after a deposit was exhausted (7 to 60 days after the tenant leaves, depending on state laws).
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