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 insure their assets as well as their incomes. When it comes to insuring their homes, most Malaysians only insure because of the bank requirement due to mortgages. And for strata-titled properties, building insurance is included in your owner’s corporation or body corporate fees so owners just need to ensure they have adequate cover for their property’s contents. Even that most owners choose not to do so.
One specific type of insurance is not on the radar of all property investors – but it should be.
Landlord insurance covers property investors for a variety of events that can result in a financial loss to you. Plus, it’s tax deductible, too. While landlord insurance policies can and do vary, there are a number of inclusions that are usually standard or optional extras.
You can insure your investment property for loss of rent, but that doesn’t mean during periods of vacancy. (Both for commercial properties as well as residential properties with different insurance companies in Malaysia).
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.
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 the rent for two months and more with all sorts of excuses and then by the time you manage to contact them they’ve already left the place and left behind a lot of outstanding utility bills such as TNB, Syabas, IWK and telephone bills.
A landlord insurance policy can cover you for rent defaults in such a circumstance. It can also provide coverage for theft, such as if that tenant also took white goods with them, because your property was partly or fully furnished.
During your property investment journey, your portfolio will need to be constantly maintained because of the wear and tear of 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 or the kids of the family dug holes in the wall for certain unknown reasons and etc.
In that instance, unless your tenants are prepared to pay to have the damage remedied (but you’ve probably given them notice to leave anyway), you can claim for your financial loss through an appropriate landlord insurance policy.
Appointing a lawyer to issue a letter of demand for the outstanding rents is the first step by the landlord. However, for a layman landlord to engage a lawyer and pay the professional fee might not be as simple as we can imagine. The landlord insurance policies can provide additional cover for legal expenses that are incurred in remedying an issue with a tenant, such as issuing legal cost for the letter of demand (up to twice a year).
Older buildings also face situations such as burst pipes, theft break-ins that spoil the door lock and etc. We understand that with a small premium that only costs below RM100 per annum, you can cover the above risk 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 cost of repair between the landlord and tenant.
Mortgage loan instalment protection
Mortgage loan instalment protection is a coverage for Malaysian landlords whereby in the event the residential properties are deemed temporarily uninhabitable or the landlord has suffered accidental death or permanent disablement, the insurance will come in to cover a six-month mortgage instalment or a benefit amount. (There is some similarity with personal accident insurance but the benefit is to cover mortgage)
One of the most significant benefits of landlord insurance is its public liability cover, especially commercial properties or properties with common area. Most policies should provide cover, which insures you against events such as injury or death that occurs at your property.
This is insurance for you as the owner if the tenant or a visitor injures themselves, or worse, at your property and decides 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 fine print to ensure that the policies cover you for the basics, plus any additional extras like flooding in Klang and etc.
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 the Executive Director of Metro Homes Realty Berhad, a registered estate agency firm.
Malaysian National News Agency
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