Don't risk being caught short – there are times when your rental isn't covered by your landlord insurance.
One thing that is sometimes not known, or understood, is that there are times when a rental will not be covered by insurance. Those times include when it is undergoing renovation and also if it is left vacant.
How long is too long?
The maximum amount of time a property can be left unoccupied and still receive full coverage varies from insurer to insurer, so check the PDS. The specific number of days varies, usually between 30 and 90 days – for EBM RentCover policies, it is 90 consecutive days.
In addition to the absence of tenants, some policies may consider the premises to be unoccupied if the minimum furnishing requirements to make the property habitable are not met. Always check with your insurer.
What happens if the property is left vacant?
If the property is vacant for longer than the policy allows, it will be considered unoccupied, and one of two things could happen:
The insurer may impose an additional excess on any claims that arise while the property is unoccupied or place restrictions on coverage.
The policy may be cancelled.
PLUS, if there is a loss during the vacant period and the insurer wasn't notified about the extended vacancy, the claim may not be paid, or the amount covered may be reduced.
At EBM RentCover, if you notify them that the property is unoccupied, they may be able to continue coverage with an increased excess.
Why is a vacant property a problem for insurers?
Insurance is all about risk.
Unless you have specifically arranged cover for vacant premises, when you take out cover for your rental or even your own home, that cover is based on the expectation that the property is occupied.
You might think that a property minus tenants is less likely to have problems – you may be right when it comes to tenant-related risks like tenant damage or rent default – but vacancy actually increases other risks, such as:
- theft (not just contents, things like fixtures and metals such as copper pipes)
- vandalism and graffiti
- malicious damage
- squatting
- illegal dumping (which can lead to pest and vermin issues)
- arson
- undetected need for repairs
- fire inception due to defective electrical equipment or undetected maintenance issues
- general deterioration caused by adverse weather and
- water ingress/damage.
Risk: criminal element
When a property is unoccupied, it is a prime target for burglars, thieves and vandals. There is an increased risk it could be used as a 'squat' or clandestine drug lab, or suffer malicious damage.
Risk: preventable damage
Events that might cause only minimal damage, if the property is occupied and there is someone around to look after it, can cause much more serious damage when there is no one home.
Insurance matters
It is important to understand that the owner still has an obligation to keep the property safe (duty of care), even if there are no tenants. This means if someone is on the premises, such as the agent doing an inspection, a meter reader, tradie, postie or charity collector, the owner can be held legally liable if that visitor sustains an injury or loss. That makes it imperative for the property to remain covered for legal liability, even if it is vacant.
What do I need to do?
You must notify your insurance provider if your rental is unoccupied for an extended period, as you will need to get a written agreement from them that full coverage will continue.
Your insurer will determine if they are willing to provide cover, under what terms and conditions, at what premium, and for how long. A vacant property can require either an endorsement or a separate policy, depending on the insurance company, and some will not insure vacant homes at all.
To summarise
If you neglect to tell your insurance provider that your rental is vacant, you could void your policy and leave yourself exposed to the costs if the property is damaged.
There are several reasons why a rental may be vacant – through design or by circumstance – but regardless of the why, it is essential to make sure the property remains adequately insured or you could risk losing more than just the rental income.
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. Please, contact the experts at EBM rentcover on 1800 661 662 if you have any questions.