What insurance do landlords need?

Landlords have had to make a much greater investment in their rental properties over the last few years – including meeting higher standards for insulation, heating and ventilation as required by the reformed Residential Tenancies Act and the Healthy Homes Act. So now more than ever it’s important to ensure your investment is protected, and that you are aware of your rights and responsibilities when it comes to insurance.

It’s worth noting that landlords are not legally required to insure their rental properties. However, given the considerable investment of both time and money involved, very few would choose not to. The question is what level of cover you have – and is it enough? With an estimated 85% of property owners under-insured, it is worth evaluating your level of cover.

There are essentially two main options for insurance available – although all individual policies will differ in what they cover and what conditions apply. You can either insure with a standard house & contents policy or choose a specialist landlord insurance policy.

Standard Home & Contents Insurance

You can opt for a standard home insurance policy, in which you would need to declare you are using the property as a rental investment (which will affect your premiums). Home and contents are normally two different policies – home insurance for the buildings/structures on the property, and contents insurance for the removable assets inside the buildings. Most landlords will still require a contents policy to cover curtaining, heating systems and any items of furniture or whiteware etc. left in the property.

A note about carpet: carpet can be treated differently according to how it is fixed – carpet which is glued to your floor is often deemed as a part of the house (as it’s not easily removed) and therefore covered by your house insurance. Carpet which is tacked onto the floor (and theoretically removable) is considered by some insurance companies to be an item covered under contents insurance. The other element to be aware of is the details of the carpet replacement – insurance companies are not obliged to replace the entire carpet if there’s damage just to one room. So the carpet replacement is unlikely to be a match to the rest of the house.

Landlord’s Insurance

More and more insurance brokers are recommending landlords take out specialist landlord insurance instead of the standard policies. Landlord insurance usually covers the buildings/structures on your property, and the limited contents cover most landlords require. While typically this insurance will cost a little more – it offers far greater protection for the unique circumstances which can occur when you are renting out your property.

In addition to standard home & contents cover, landlord insurance can also include:

• Compensation for loss of rent in different circumstances, including tenant absconding with debt
• Intentional damage by tenants and/or others
• Emergency repairs and/or replacing locks and keys
• Legal liability and reparations for any damage caused by your property to a third party
• Methamphetamine contamination repair
• Hidden gradual damage cover

A couple of banks are now including specialist Landlord Insurance in their investors cover, but insurance companies in general do not. We recommend Real Landlord Insurance, a specialist insurance company who only writes for Landlord Insurance cover.

Your responsibilities as a landlord

No matter which option you choose, as a landlord there are three important obligations regarding your insurance.

Firstly, whatever your insurance (or even if you choose to go uninsured) – landlords are legally obliged to advise their tenants of the cover for the property and the amount of excess. You also need to be able to provide information of the insurance policy to the tenant if they request it. This also includes notification if any changes are made to your existing policy.

Secondly, your insurance policy does not cover your tenant’s personal property, and all premiums need to be paid for by you as the property owner.

And finally - insurance companies will have different conditions regarding claims – but most of them will require evidence of careful tenant selection, bond and rent collection, and thorough property inspections.

Using a property management service like Point Property gives you as the property owner, greater peace of mind. All of your tenant applications, referrals and property inspections are meticulously recorded by your Point Property Manager should a claim ever be needed. It’s another way we help you to protect your investment.