Although not legally required, there's no doubt taking out landlord insurance can benefit residential rental property owners.
Insurance is a just in case, hopefully you never have to make a claim. But it's always good to have a safeguard. So though it’s tempting to under-insure now and save a few dollars, adequate landlord coverage will help you recover any unexpected property damage caused by tenants and natural calamities or loss of rent if the property has become unsuitable for living and can also help property owners pay for medical expenses if someone suffers and injury while inside the property's premises.
What insurance do I need as a landlord in NZ?
Landlord vs Home Insurance
Both types of policies cover different things. Home policies provide cover for owner-occupied properties, whereas landlord policies cover the unique scenarios faced by landlords, such as loss of rent, legal liability, and so on.
Landlord Insurance - What Does Landlord Insurance cover in NZ?
Typically, landlord insurance covers the following:
Repair or rebuilding cost
This includes the cost to repair or replace your rental property and its contents if these have been damaged by man-made disasters and natural calamities, including earthquakes, storms, fire, flood, theft and explosion. This doesn't cover tenants' personal belongings.
Intentional damage caused by tenants
Some tenants deliberately cause damage to property, especially if there is an eviction, or in the process of an eviction. Landlord insurance can help pay for such damage.
Loss of rent
If the house becomes unsuitable for living, landlord insurance can help cover for the financial loss - typically to a maximum of $20,000, or equivalent to 12 months of rent. If your tenant leaves without giving you notice, some policies will cover up to 6 weeks of rent loss, depending on the insurer's policy.
Legal liability
As a landlord, you could be held liable to pay for damages or reparation for accidental bodily injury or loss to someone else's property that arises out of the ownership of your home. This covers any damage caused by your property to a third party.
Landlord Contents
Too often landlords who let unfurnished properties don’t bother with contents. But whether your rental property is fully, partially, or unfurnished, a contents policy covers more than the landlord’s chattels. Contents also provides cover for fixtures and fittings, including floor coverings, curtains, and dishwashers, making it a good policy to have, even if you let unfurnished.
Methamphetamine contamination
This covers the cost of the clean up, repair, and possible rental loss caused by meth contamination.
What Are The Exclusions?
Although some policies provide coverage for unpaid rent, there are others that argue that it's a payment risk managed by the property owner. Every policy differs; don't assume you'll be covered without reading the fine print.
Gradual damage that build up over time causing major damage to the property, such as leaking pipes or molds, are also not covered, even though these are likely to happen as tenants are less likely to report small leaks or the first signs of molds. Wear and tear is also likely to be excluded, such as upgrading windows because of rot won't be covered.
A tenant who moves out and leaves a mess may not constitute 'damage' so you won't be able to claim this.
Landlord Obligations
When extending, renewing, or establishing new tenancies, landlords are required to provide specific information to tenants when complying with Section 13A of the Residential Tenancies Act.
Landlords must insert into tenancy agreements a statement explaining the parts of the insurance policy that is relevant to the tenant’s liability for destruction of or damage to the premises, the amount of each excess that is relevant (if any) to that liability; and inform the tenant that a copy of the policy is available to the tenant on request. Alternatively, if the premises is not insured, this too must be stated.
Some Final Words
Check Your Policy - Be Aware of What's Not Covered
Landlord insurance cover does range between providers, so it’s essential to check the terms and conditions in detail. Generally, the more coverage, the higher the cost. Make sure the quote offers the right coverage, and consider what excess levels or extra coverage you are happy with.
Check The Excess
Check the excess in your landlord policy. It’s tempting to increase the amount of excess you’re required to pay on any claim to help make your policy payments smaller, but this prevents you from being able to claim on smaller items which usually occur more frequently than bigger disasters.
Check For Any Claim Requirements
It's common for companies to include requirements that must be satisfied before they will honour the claim, such as proof the landlord has completed a thorough tenancy selection process, or proof quarterly inspections have been completed.
Best Landlord Insurance in NZ?
To find out which insurance companies provide the best landlord insurance in New Zealand, Money Hub reviewed the different policies offered by the country’s biggest names in home insurance. They found that insurers such as Tower and Initio offer more substantial coverage, with methamphetamine cover up to $30,000 and intentional damage and contents cover up to $20,000 within standard policies. Other insurers offer these covers as an optional extra.
Landlord insurance is not straightforward at all, you'll need to understand your policy to make the best choice. For this reason, we highly recommend consulting an insurance broker to pick the right policy for your needs.
If you're considering new management of your rental, get in touch with our team today.
Locally owned and managed, we offer residential property management services across the Wellington & Hutt Valley region.
We take care of investments, offering peace of mind and a personal service to investors and tenants alike. Our solutions are backed by industry-leading technology and proven systems that promote both excellent property care and strong investment returns. Taking on all aspects of the landlord’s role, we guide our clients with professional, tailored advice using our extensive experience and insight in the rental market that can only be built over time.
If you would like to chat about the possibility of working together, or to receive a no-obligation, FREE Rental Appraisal get in touch with our team today.
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Call Jordan Atkinson - 027 297 0873
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