Published with permission from Vero Insurance New Zealand
A rental property can be a valuable investment, but it’s not without its challenges. As a landlord you have to foot the bill if things go wrong with your tenants or property, and having the right insurance cover can help.
Insuring a rental property is a little bit different to insuring a house you live in, and it’s important to understand how your cover works and what your options are. This allows you to make decisions about how to protect your investment in a way that suits you.
1. A house insurance policy offers some cover
You may decide you don’t need any special landlord cover for your rental, and choose to only cover the structure of your property by taking out a standard house insurance policy. Just be aware that when you take out a policy, you need to specify to your insurer that it’s tenanted rather than owner-occupied, and check whether that means there are special conditions or excesses.
House insurance doesn’t usually cover any furniture you’ve provided or your tenant’s belongings, it will only cover anything permanently affixed to the house such as a fitted kitchen, bathtub or the carpet.
2. Most insurance won’t cover deliberate damage
Insurance policies are designed to cover accidental damage, meaning if a tenant deliberately damages your property, it generally won’t be covered.
Landlord insurance policies may offer some limited cover for deliberate or malicious damage.
3. You can add on specific landlord cover
This generally covers damage caused by events more specific to rental properties, like malicious damage caused by tenants, loss of rental income and your legal liability as a landlord.
4. Your policy is really designed for the big stuff, not for small damage or wear and tear
Insurance policies are usually designed (and priced) to cover the big stuff you can’t afford to pay for yourself, and your policy usually has an excess that means it’s not worth claiming for minor damage.
Over time, tenants might cause minor accidental damage – like multiple stains on the floor – that add up to you wanting to replace the carpet. The way your policy works is each ‘event’ of damage incurs its own excess, so a number of individual stains over many months would probably incur a higher total excess than the claim is worth (unless you can prove the stains were the result of a single incident).
This probably happens in your own house too, but where it gets complicated for landlords is they may not see the damage accumulating over time if they’re only inspecting a property occasionally, so it feels like one event. It’s important to keep in mind what kind of damage is wear and tear, requiring routine maintenance, and what kind of damage should be an insurance claim.
5. You have obligations as a landlord
While landlord insurance is designed to protect your investment, as a landlord you’re also responsible for taking good care of your property.
Many landlord covers will include specific obligations you need to meet to keep your insurance valid. This includes things like selecting your tenants carefully, actively monitoring rent payments and doing regular checks of your property to help identify problems as quickly as possible and prevent any damage becoming worse.
Make sure you read your policy carefully so you’re aware of any conditions, or talk to your insurance broker to understand your insurance obligations as a landlord.
If your tenants accidentally damage your property you may be able to recover your insurance excess from them, but you need to let them know what your excess is, and provide them with a copy of your insurance policy. Claiming back any excesses needs to be handled between you and your tenant – your insurer won’t be able to get involved.
If you’re interested in taking out cover for a rental property, Brian from Over Fifty Insurance can offer you personalised advice on what level of cover might be right for you.