Elite AgentEPMEPM: Best Practice & Legislation

The do’s and don’ts of landlord insurance

The complexities of landlord insurance can leave even the best property managers stumped. EBM RentCover Managing Director Sharon FoxSlater explains where to start and what to do to ensure you, and your landlords, are covered

When you are in a highly-regulated industry such as real estate, things can change quickly and get complicated. Throw in the complexities of insurance, and we wouldn’t blame you if you started pulling your hair out.

START AT THE BEGINNING
To keep your locks intact, it is a good idea to know your rights and responsibilities as a property manager and to ensure you are working within the laws so you can make well-informed decisions when protecting investments.

All companies or individuals who provide financial advice or deliver a financial service must be licensed under the Corporations Act.

The Act – regulated by ASIC – is hundreds of pages long, but when it comes to insurance, it states that anyone who deals in a wide range of actives (including, but not limited to, selling a policy, discussing insurance and arranging cover), must do so under an Australian Financial Services Licence.

Many property managers do not hold their own licence, so they should have an agreement with a business that holds one (such as EBM RentCover).

If they do not partner correctly with the right business, they risk running into legal trouble as they are ultimately not doing as the Act states, and will not be educated properly on legislative requirements associated with arranging cover for rentals.

LINKING ARMS WITH AN INSURER
When you work with a good landlord insurance specialist, they should educate, support and train you to make sure you are working within the rules of the Act.

The rules ultimately come down to what sort of agreement you have with the insurance provider.

You can partner as a Distributor, Corporate Authorised Representative (CAR) or Referrer. The different type of authorisation gives you different levels of responsibility.

IN A NUTSHELL
Referrers are not authorised to provide a financial service or arrange insurance, but they can supply brochures, flyers and marketing material to clients so they can determine the most suitable cover for their investment.

In some situations, referrers can pay premiums if they are not doing any other insurance-related activity (check with your insurer).

Distributors must be appointed under an Australian Financial Services Licence and can do everything from arranging cover for a client to handing out information and paying premiums.

What they can’t do is offer any advice.

CARs must be appointed under an Australian Financial Services Licence and registered with ASIC.

They can do everything a Distributor can, in addition to providing certain advice. However, at EBM RentCover, we prefer our CARs do not offer advice about our products.

This is because there is a greater risk for an agent to get into trouble if they say or do the wrong thing. Instead, what we like to do is provide training and support to property managers and have their landlord contact us for detailed information.

DIGGING DEEPER
Arranging insurance and paying premiums for a landlord often causes a bit of confusion.

A lot of property managers believe, if they have verbal consent, they can apply for cover, and sign and tick all boxes, on their client’s behalf (including the Duty of Disclosure).

While you can’t sign an application form and pretend to be the landlord when applying for protection, some insurers and policy types allow you to simply get written consent.

This means the client does not need to fill in an application form.

If they write to their property manager saying ‘please apply for Policy A for my property’, the agent may be able to legally arrange cover.

However, this is dependent on varying factors, including insurance type, the property manager’s alignment with the insurance specialist and the details provided by the landlord.

However, wherever possible, it is always best to get them to fill in an application form. Insurers rely on the information in an application form to determine risk and whether they are willing to take it on.

Getting the information incorrect can have an impact on claims – an insurer has the right to refuse to pay a claim when it is discovered the application form contains false information.

To reduce the risk to your landlord and yourself, it is suggested you get them to fill in an application so they can make sure all the information provided is true and accurate.

Then, you can arrange the appropriate cover they have requested.

However, if you are in a situation where your landlord cannot complete an application form, check with your insurer for alternate options.

WHEN THINGS GO WRONG
We all make mistakes and the unexpected often occurs.

That is why insurance exists and why, when you align with EBM RentCover, our Professional Indemnity (PI) insurance extends to you.

This means, if a landlord says you made a mistake when you were dealing with our products and services, which resulted in injury or financial loss, our PI Insurance covers the cost of a legal defence and any damages you may have to pay.

Remember, when insuring investments you want to ensure you are clear of breaching any legislative requirements. Partnering with the right insurance specialist can help.

THEY SAID WHAT?!
So what happens when your landlord says they don’t need insurance for their property or asks you to go with the cheapest option?

While it is important to respect the wishes of the landlord, it is also a property manager’s job to make clients aware of the risks that come with owning an investment property.

And not having adequate insurance cover is a big one.

To help landlords better future-proof their investment property, we have scripted some responses to common comments made by landlords so you can explain the value of specialist landlord insurance.

It’s too expensive
If you can’t afford to fix it, you can afford to protect it.

Landlord insurance premiums can start at just a couple of hundred dollars a year.

That is extra protection for a property, for the approximate cost of a large coffee a day.

Still think it is too costly? Check out how much more expensive it is to restore a home in the aftermath of a natural disaster.

The cheapest policy is probably best
There are many reasons premiums vary from insurer to insurer and policy to policy, including the amount of cover, the sum insured, excess and limits.

When looking for a suitable insurance policy, it is suggested a decision is based on value and need, not price.

But I will probably never make a claim
If you are fortunate, you may never make a claim against your insurance.

However, accidents and unexpected disasters can, and often do, occur.

When you are involved in the unpredictable (such as Mother Nature), it is important to have protection for your investment.

The body corporate has me covered
The body corporate may be required to insure the building and common areas in a strata-titled property, however the moment someone steps inside your home, you may be responsible for negating a number of risks.

Risks include liability should someone injure themselves inside your premises and damage to the contents.

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