If you plan on renting out a room or your house to short term tenants, there are some things you need to consider. One of the most important is how it will affect your insurance cover.
Non-Disclosure
Failing to tell your insurance company about the change in occupancy could result in non-disclosure; which in turn could result in non-payment of a claim. Make sure you let your insurer know if you intend to rent a room or home to short term tenants or guests. A house, rental or landlord insurance policy designed for long term tenants is unlikely to cover you.
Getting the right cover
Just because you’ve got insurance, and you have disclosed the occupancy, it doesn’t mean that you are covered. You will need to specifically ask your insurer about policy coverage whilst short term tenants / guests are staying in your home. Some of the key questions to ask are:
Any cover for damage/theft by short term holiday rental guests?
Is there a cover for lost rental income following a damage to the property?
Will there be cover if guests contaminate the home with methamphetamine?
Simply continuing to insure the home isn’t always enough. You want to make sure that you have the right insurance cover for the increased risk exposure. If your existing insurer cannot provide this cover check out initio.co.nz who specialises in rental and holiday home insurance.
If your home or unit is used solely for short term tenants it is unlikely to meet the EQC (Earthquake Commission) definition of a home. This is because it is viewed as more like a motel, and will require a commercial insurance policy.
Don’t rely on Airbnb Host Guarantee
The Host Guarantee is not an insurance policy, and should not be relied on as such. The extensive terms and conditions including time limitations can make receiving a payment from Airbnb difficult. There are no guarantees of payment with this guarantee. The security deposit paid by guests is also controlled by Airbnb so unless Airbnb and the guest agree, you cannot retain any security deposits to cover your damage.
How to stay safe
If you do decide to list your home (or room) online with sites such as Airbnb or Bookabach there are some simple ways to stay safe.
Screen guests by checking online reviews and looking at online profiles such as Facebook and LinkedIn. Don’t be afraid to ask for references, and remember you can decline a booking if you are not comfortable.
Don’t go off the platform, and complete the transaction offline, this will void any ‘guarantees’ offered by Airbnb. Always be wary of guests wanting to pay with prezzy cards or cash.
Question guests intentions if they are wanting to stay for extended periods at short notice; especially if it is off season and your home is in a remote location.
Always refund cancellations to the credit card used to make the payment to avoid assisting money launderers.
Don’t leave valuable or sentimental items lying around for guests to use or damage.
Consider installing a meth alarm.
Keep your keys safe by not always leaving them in the same place.
Build relationships with your neighbours so they can keep an eye on the home and report any suspicious behaviour.
To insure a property that is let to short term tenants (such as via Bookabach or Airbnb), initio require the dwelling to be ‘capable’ of being the home or holiday home and ‘intended’ by the owner to be a home or a holiday home.
Included below is an extract from the EQC Guidelines defining a holiday home and the intention of a holiday home.
A holiday home is a secondary residence for somebody whose home is elsewhere. It may be used on a transient basis by that person, usually for holidays.
As guidance, a building is unlikely to be a holiday home if:
it is set up purely as a commercial enterprise and the owners do not use it or intend to use it for their own purposes (or for somebody else to use it as their holiday home).
an organisation which owns holiday homes purely for the benefit of its members, and these members pay to stay there.
it is on the same property as the owners’ residence. Even though others, like family and friends, may use the building for holidays or visits, it is unlikely to be the holiday destination for the owners or the holiday home of any other person.
“Intended to be a holiday home”
From the circumstances there must be an intention on the part of the owner to return again and again no matter how minimal the use. At a minimum it is acceptable if the owner has the entitlement to occupy the property whenever they wish and they store their possessions there.
It is contemplated that a holiday home may be used:
solely by the owner;
by friends and family as well as the owner; and
by tenants on a periodic basis but the owner too, when the owner wants to use it.
Where a home is used solely for short term lets, initio is unable to provide insurance. This is because it is deemed to be a commercial venture (more like a motel) and does not meet the EQC definition of a home.
Your own home is your primary residence which you live in. You may live in the home alone, with family or with flatmates. The home could be owned by you personally, by a trust, a company, or in partnership with someone else.
Rental Property
A rental property is a residential house occupied by long term tenants. It is expected that the tenants will remain in the home for more than 90 days. If rent is not paid because the home is occupied by an employee or a member of your extended family, it is still classed as a rental property.
Multi Unit Rental Property
A multi unit rental property is multiple, attached residential units or flats. The units will all be under the same roof, owned by the same person or entity, and occupied by long term tenants.
Holiday Home
A holiday home is house or bach that is your secondary residence which you intend to use personally for family holidays. It may also be used by friends and family, but it is not advertised for rent or used by people not personally known to you.
Holiday Home thats Rented Out
A holiday home thats rented out, is house or bach that you intend to use personally for family holidays. It is also advertised for rent to short term tenants (via sites such as bookabach or airbnb) and is used by people not personally known to you. It could also be your own home which you, may or may not vacate, to allow short term tenants to stay in your home.
Dedicated Short-Stay Rental House
A dedicated short stay property is a house that has been setup purely as a commercial enterprise for short term tenancies. You have no intention of personally staying in this property.
Initio is pleased to announce that it has teamed up with Bookabach to provide insurance for holiday homes and baches that are rented out on occasion. Our specialist rental property insurance policy has been tailored to meet the needs of properties with long term tenants and also those properties which are rented out on a short term basis (eg holiday homes).
If you own a holiday home and this sounds like you…. Even if you don’t rent it out that often, our policy is for you.
The main question is do you have the right covers. Your existing insuring may take exception to the fact that your property is let our on occasion. Get it right from the beginning and insure with initio.
There are now additional Landlord’s Obligations increasing the standard of care required. It is important that you adhere to these obligations if you were ever to lodge a claim under the Landlord’s Protection or Methamphetamine Contamination policy benefits.
LANDLORD OBLIGATIONS:
Under the new policy (effective from 1 December 2018 for new policies, and 1 January 2019 for renewing policies) to meet landlord obligations you will need to:
complete an internal and external inspection of the home at a minimum of 3-monthly intervals and the relevant residential dwelling upon every change of tenant(s).
keep photographs and a written record of the outcome of each inspection, and provide to us a copy of these if we request it.
monitor rents on a weekly basis with written notification being sent to the tenant(s) whenever rent is 14 days in arrears, together with a personal visit to determine if the tenant(s) remains in residence.
make application to the Tenancy Tribunal for vacant possession in accordance with the provisions of the Residential Tenancies Act 1986 if:
the rent is 21 days in arrears, or
you become aware of any illegal activity by the occupant(s) at the home, or
intentional damage to the home is caused by the occupant(s).
Any new tenancies that commence after 1 January 2019 will be subject to the new tenant vetting requirements. These are:
exercise reasonable care in the selection of the tenant(s) by at least obtaining satisfactory identifcation and written or verbal references for each adult tenant and when a reasonable landlord would consider it appropriate also check their credit and Tenancy Tribunal history.
keep written records of the pre-tenancy checks conducted for each adult tenant.
collect a total of 3 weeks’ rent in any combination of rent in advance and bond that will be registered with Tenancy Services.
METH CONTAMINATION
Initio continues to provide cover for meth, and is still considered to be some of the best meth cover available.
The new policy now specifically defines meth contamination as an insured event, where the old initio policy (due to its age) did not specifically define meth – however it did provide cover. The new policy seeks to provide more clarity and certainty of cover for meth damage. Under the new policy the limit of cover for damage arising from both meth manufacture and for meth consumption is as now per the policy schedule – where is set a $30,000, with a $2,500 excess.
The landlord obligations above apply to meth cover so its important that you are managing your property in line with these obligations.
Regarding your liability as a landlord, you are not covered for your liability for accidental loss to someone else’s property (eg your tenants contents) in connection with the presence at the home of any ‘controlled drug’ as defined in the Misuse of Drugs Act 1975 – Unless you, or the person who manages the tenancy on your behalf, have fully met the Landlord’s obligations and have tested for the presence of methamphetamine before and after each tenancy of the home in accordance with the New Zealand Standard NZS 8510 and the testing has confirmed that methamphetamine contamination at the home does not exceed the contamination level. Please note that you are NOT required to test the property between tenancies to receive cover for Methamphetamine Contamination, only for meth related liability as a landlord.
Meth in rented holiday homes
Please note that where the home is occupied by short-term paying guests as a holiday home, then the above Landlord’s ObligationsDO NOT apply, however holiday homes are only covered for manufacture of meth not consumption of meth.
Where Methamphetamine Contamination Damage occurs in connection with a any tenancy or occupancy of 90 days or less, there is NO cover unless the contamination damage was caused by manufacture, distribution or storage of methamphetamine at the home.
This is not an exhaustive or comprehensive list of the changes to the policy but rather a high level summary. For full details of cover, benefits, conditions, and exclusions please see the policy document Initio landlord and holiday home policy NZ1811
Less than 3 claims in 3 years, or 2 claims in past year
LOCATION:
Houses located in Auckland, Waikato, Bay of Plenty, Gisborne, Hawkes Bay, Taranaki, Manuwatu-Wanganui, Wairapapa, Kapiti, Nelson, Tasman, West Coast, Canterbury South, Otago, Southland
Christchurch house built after 2013
Christchurch house on TC1 or Rural Unmapped or Banks Peninsula
Tsunami Zone (check flood history)
PROPERTY:
Built after 1945
Sum insured up to $1,000,000
A block of up to 6 units, not more than 2 stories
House with a home office
Rental House
Holiday Home and Holiday Home that is let out
Owner Occupied Home
Own Home that is also let out (rate as holiday home that is let out)
CLIENTS:
No Convictions or only Traffic Convictions
Clients who have filed Bankruptcy
Referral Risks
CLAIMS:
A single house/contents claim over $5,000 in the past 5 years
3 or more claims within the past year
Details of claims required, what steps have been taken to prevent further losses?
Repaired Earthquake Damage (IAG Managed)
Supplementary Application Form Required
LOCATION:
Christchurch House on TC2 or TC3 that has had no EQ damage.
Supplementary Application Form Required
House purchased in Wellington, Porirua, Lower Hutt, Upper Hutt, Marlborough insured with IAG that has had no EQ damage.
No Damage Declaration Required
PROPERTY:
A positive (and remediated) Methamphetamine test result
Copies of before and after test results required.
A fully renovated house built prior to 1945 with good associated business.
Pre 1945 Questionnaire Required
Any house that is used for business (other than a home office)
Details of business, client access to house, area size of house used for business.
Unusual Construction (ie straw homes)
Details of construction, was it professionally built, and does it have council approval?
Houses identified as having a flooding / landslip risk
Flood and Landslip Questionnaire Required
CLIENTS:
Any Convictions (other than traffic), not excluded below.
Please provide details of conviction including sentence
Previous Refusal, Declinature, Cancellation or imposed terms
Please provide details and circumstances including insurer
Red means No
CLAIMS:
Houses with an open claim.
Unrepaired or Cash Settled Earthquake Damage.
Property with two or more flooding claims.
LOCATION:
Christchurch house on TC2 or TC3 that has had cash settled earthquake damage
Houses in Wellington, Porirua, Lower Hutt, Upper Hutt, North Canterbury, Marlborough not already insured with IAG
Remote and/or Off Shore Locations (excl Waiheke)
Houses subject to a Section 74 of the building Act 2004 (or Section 36) Notice
PROPERTY:
Pre 1945 Houses in Christchurch, North Canterbury, Marlborough, Wellington, Upper Hutt, Lower Hutt, Porirua
A pre 1945 house with no associated business
A unit attached to more than 1 other unit
Short Term rental that is not the owners holiday home
Unoccupied house or Spec / Show homes
Houses purchased at Mortgagee Sale
Houses leased to Housing NZ or any similar organisation
Caravans or Tiny Houses on wheels
Property currently undergoing major renovation / construction
House that is not watertight, structurally sound, unsecure or not maintained.
Boarding Houses
Property intended to be demolished
CLIENTS:
Convictions for theft/burglary, fraud/dishonesty, arson, criminal/willful damage, drug supply/manufacture.
Any convictions where the client has been Imprisoned in the past 7 years.
When you take out insurance, the policy wording will include your Duty of Disclosure. This will state that you have duty to disclose to all information that a prudent insurer would want to take into account when considering whether to insure you, and if so on what terms. When taking out or renewing home insurance, be careful to avoid ‘non-disclosure.’
Non‐disclosure is when you fail to reveal a material fact when applying for, or renewing, insurance. An example of this is not telling your insurer you have a criminal conviction, or that you have set up a mechanics business in your garage.
Where there has been an omission of the information the policy may no longer be valid. This means that when it comes to claiming, your claim could be reduced or refused. However, if an omission is not relevant to the situation of the claim, it should not affect the claim.
Examples of non disclosure
Common areas where policy holders often non disclose without even realising include:
tenanting your own home (short or long term)
carrying out structural renovation work or adding an extension to your home
not revealing that you have had insurance refused, cancelled or had special terms imposed
running a business from your home
not disclosing your criminal conviction
not informing your insurer of natural hazards on your property, such as a flood zone or land instability
The message is simple; if in doubt inform your insurer so you have peace of mind and certainty that you’re covered.
When we think of Christmas and New Year ’s Eve celebrations images of family, fun and all-around excitement immediately come to our minds. With Christmas around the corner it’s important that you have your property and contents insured and ready for the silly season.
Initio is a key player in safeguarding your holiday home as you have family, friends and tenants in your property throughout the season. It’s insurance cover that addresses the specific additional risks related to use of the holiday home for short term rental accommodation. Plus, it’s all done online!
Within moments you could have cover for your bach, rental or holiday home without leaving the office. Tick insurance off the list this season and take comfort in knowing Initio has got you sorted.
From all of the team at Initio we wish you merry Christmas and a safe and happy New Year!
Methamphetamine contamination in a rental property can be an alarming and confusing time for property owners. There are conflicting theories on what levels are acceptable and what needs to be done to get the house livable again. Initio keeps it simple and adheres to the Ministry of Health Guidelines which state that any house reading more than 1.5mg of methamphetamine per 100 cm2 needs to be decontaminated.
If your short or long term rental property has tested positive for the presence of methamphetamine and you have house insurance with Initio, here’s what you need to do:
If you haven’t already, you need to get a detailed room-by-room test completed. This will show you which specific areas of the house are contaminated.
Log into your dashboard on the initio website and click on the make a claim button.
Fill in the form and attach your test results.
We’ll email or call you within one business day.
FAQ’s:
Does my initio landlord insurance policy cover methamphetamine contamination?
Yes, there are two types of claims:
Manufacture: If there is evidence to prove that methamphetamine was manufactured in the property, then there is cover up to your sum insured.
Consumption: If methamphetamine was consumed in the property, there is cover up to $30,000.
What is the excess?
Methamphetamine contamination claims have a specific excess of $2,500.
Can I start cleaning the house?
Not yet, please follow steps 1-3 above and then we’ll work together on getting the house livable again.
“All claims are different and they are assessed on their own merits and facts. The above does not imply a guaranteed approach to all such claims”
Methamphetamine is not a discriminatory drug … anyone could be using or manufacturing methamphetamine in your rental property … even your tenants!
