As global concern about the current COVID-19 outbreak grows and the scenarios unfolding before us, there are many questions about Landlord Insurance policies and what is covered. We have asked one of our insurers to outline and answer some of the most common questions that landlords may have.
To answer some key questions related to Rent Default, COVID-19 and Landlord Insurance , we’d like to provide the following, clear and transparent answers:
General questions about tenant default and loss of rent default coverage
• Residential Landlords policies generally do cover the insured landlord at the insured premises for loss of rent due to tenant default, as long as the tenant default & loss of rent option has been selected (the vast majority of policies).
• As tenants might default on the rent due, under the rental agreement for a number of reasons, it is important that Property Managers follow the appropriate steps when this occurs - such as issuing arrears notices, notices to vacate etc.
What happens if a tenant falls into financial hardship for any reason?
• Policies will respond as per the policy wording and Policy Schedule which your insurer has provided. The root cause of the financial hardship will not affect the response of the policy. Every claim is always assessed on its own merits and facts. This means that each case will be assessed on its merits, just as it would have been prior to the COVID-19 outbreak.
What about ‘quarantinable diseases’ clauses?
• If your policy does state that “We will not pay for.. Loss of rent where there is a widespread outbreak of any strain of influenza virus or any other diseases declared as quarantinable by the relevant government authority.”
• This exclusion only relates to tenant default resulting directly from the premises being contaminated by COVID-19 or similar widespread virus/disease and the premises requires decontamination. Most policies do not cover the costs of decontamination and/or any subsequent loss of rent due to tenant default.
• In practice, this means that :
o Rent default will be covered if the rental default is found to be the result of financial hardship under the standard process.
o However, it will not cover costs of decontamination to a property.
o It will not cover loss of rent as a result of the contamination and time taken to decontaminate.
We hope this answers some of your questions . We do suggest you review your policy schedule and contact your insurer or insurance broker directly to answer specific questions relating to your policy.
Take care and stay healthy
Peter Gordon
Disclaimer: The information provided is subject to change and does not form part of an offer or contract. While every care has been taken and is accurate at the time of publication, Investo Property accepts no responsibility or liability for changes, errors or omissions. Interested parties should not rely on it for their own circumstances. Investo Property always recommends that separate legal, insurance, tax, financial and other advice relevant to individuals should be sought in relation to Insurance polices. All information is subject to change without notice.
