Benny wrote:

Hi BClarke,
This is useful from you, but it leads me to more questions (sorry):-

There are key points to this that in my opinion are non-negotiable items when it comes to landlord insurance, these include inclusion of Accidental Damage rather than just Malicious Damage, no excess on loss of rent claims (huge impact on claimable amounts), and a number of other features.

From what I am reading of 5c1’s case, just the fact that a Company “covers” Accidental Damage is not enough. Like for Malicious Damage, it could be that Accidental Damage has a limitation on it somewhere in the back of a PDS too. Could this be so??
Why can’t Insurance Companies be directed BY LAW to state their exclusions up-front and out in the open (a bit like Banks and that “Comparative Rate” that puts the lie to their screamingly LOW Interest Rate). Isn’t there something called “Truth in Advertising” that would direct these Companies to be up-front with their exclusions?
Benny

It’s certainly possible, insurance policies often have sub limits on specific sections of the policy. I can only speak conclusively for our RentCover products where there is certainly no sub limit on either malicious or accidental damage, they are both up to $50,000.

Going back 25 years there were two landlord insurance policies on the market, today I expect I could find anything up to 100. Most unfortunately are major insurers who have essentially tweaked an existing household policy and called it a landlords policy. There are only a handful that I would rate as being true landlord policies that have been designed in consultation with the property management industry.

Unfortunately, the creation of many of these policies has largely come about through people’s needs to simply find a cheap price, so major insurers gloss it up and make it cheap and simple to get, but many only find the shortcomings when they go to make a claim.

Insurance is complicated and to be fair Insurers do go to a fair bit of effort to make it clear, but it’s nowhere near as simple as advertising a “comparative rate”.

Quite simply they can’t put everything up front, an insurance policy is far too complicated and requires a lot of explaining. I actually don’t think it’s fair to say that is hidden at the back or something. You are entering into a contract for a substantial amount of money (cover), and every section of that contract is important, so yes you do need to read it. In reference to the QBE PDS that was mentioned in this post, I had a quick look at the one I’m assuming it is, and it may be on a late page but in fairness it is a limit on an optional section of the policy. It is laid out fairly clearly, but I appreciate that a PDS is a complicated document to read, as however is any contract. It’s also important to remember that when you apply for insurance, you are agreeing that you have read and understood the PDS.

• This reply was modified 8 years, 1 month ago by  bclarke.

Benny wrote:

Hi B Clarke, Thanks for your comments

I have written numerous times on this subject, malicious damage is a very specific term. So in my opinion you may have been lucky to even get the $10,000. What this does though is to highlight once again the need to be really careful about what’s included in policies.

That is scary – to think that if not deemed malicious damage, there may have been NO payout? (ref. “lucky to get $10k”).
Surely, since very few properties are rented to grow cannabis, there would only be a small premium to cover such an event surely. But if we had to physically list each/every possibility re damage (meteorite hit, neighbour’s property subsiding and having their house fall and break ours, car/truck/bus crash through our house, etc.) like there must be a thousand ways that a house could be damaged.
I struggle to think of all of the things that MIGHT happen that might need to be quantified (and charged for) to get FULL insurance. Even if I spent a month, I doubt that I would be able to think of EVERY eventuality that could break a house.
Doesn’t ANYONE just “cover the lot”?
Benny

First things first. There is no such thing as just “covering the lot”. As you say, you could never list every individual event and neither could any Insurer just “cover everything”, it’s far too open and could never be priced. Certainly no-one could ever afford “cover the lot” insurance. The best example of difficulties with insurance in this regard is cyber insurance (I know this is off track). Cyber Risk and subsequently Cyber Risk insurance is so new, that the Insurer’s are battling to keep up. Every time they add a type of risk in, a new risk emerges. Similar to trying to keep up to date antivirus protection, you can update today and it is out of date tomorrow because someone found a new threat to release.

Now, back on the subject. With insurance you don’t have to list every possible event, it’s done more with types of risks (such as fire, storm etc.) and then with certain exclusions where the Insurer limits that risk. Somewhere something needs to pretty much be either covered or excluded. So for example a general household policy may say it will cover malicious damage unless you (the owner) caused it, meaning it will only cover malicious damage by other parties (it’s not as simple as that but just to make the point).

Covering something like setting up a cannabis growing system would not need to be included specifically, it would most likely fall under either deliberate and intentional damage (if included) or for us the more encompassing Accidental Damage (which in our world accounts for some 60-70% of damage claims). In the same definition there could be anything from red wine spilt on the carpet, right through to a full blown drug lab which can easily cost in the tens of thousands of dollars (and we’ve paid claims in these figures).

Just for your interest this is a link to a fairly simple page I have don eon the Malicious Damage vs Accidental Damage subject. It’s the biggest area (in my opinion) that landlords get caught out when looking to save money on insurance.

Bottom line becomes, looking for insurance that is value, not necessarily cheap. You have to make sure you are covered for the risks you want to be covered for and accept that there are risks you are happy to pay for yourself if they occur.

If you don’t mind paying out $50,000 to repair the damage and associated clean up from a drug lab, then don’t worry about making sure it’s covered. Personally, I don’t want ugly surprises when I go to claim.

Benny wrote:

Hi 5c1,
As one who has never had a tenant doing that, can I ask just what actually happened to the house? Like, do they knock down walls to put pipes in, or flood the place leading to rot in the floor? Without your words today, I wouldn’t even have thought of growing cannabis as being “malicious damage”.
Can you help me understand more by explaining just what damage was done?
And hey, sorry to hear what happened – thanks for the “Heads Up”
Regards,Benny

I’m a little surprised that they classified this as Malicious Damage, it would generally be more likely classified as Deliberate/Intentional, or Accidental Damage, as the tenants “intent” was not to damage the property, their intent was to facilitate growing drugs. I have written numerous times on this subject, malicious damage is a very specific term. So in my opinion you may have been lucky to even get the $10,000. What this does though is to highlight once again the need to be really careful about what’s included in policies. There are unfortunately a lot of traps in key areas, particularly the more generic major Insurer policies as opposed to those that have been specifically designed for rental properties by the specialist companies. Having been involved with these products for over 25 years I am very passionate about this subject and people avoiding mistakes just to save a few dollars.