What is Landlord Insurance?

Owning and insuring a rental property is not the same as owning and insuring your own home. There are additional risks that landlords face as home-owners which makes rental properties typically more risky to insure.

Landlords need all the essential cover that a standard home insurance policy will cover such as fire, flood, and natural disasters. Landlords also require cover for the additional risks they are exposed to by renting their house to tenants.

This is why it’s important for landlords to get the right insurance cover in place. A comprehensive landlord insurance policy will provide cover for the large and physical losses, as well as piece of mind around the dangers of renting.

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Damage by Tenants

Accidental Damage - up to full replacement sum insured
Wind storm blew over front fence
Careless Damage - up to full replacement sum insured
House foundations severely damaged by Canterbury Earthquake.
Deliberate Damage - up to $25,000
Fire in the laundry caused by an overloaded electrical multiplug
Deliberate Damage by Fire or Explosion - up to full replacement sum insured

2. Loss of Rental Income

 

When a landlord suffers major damage to their property they are faced with two main costs. The actual cost to repair the physical home itself, and also the lost rental income they would have received if the property was still occupied.

Loss of rent cover is included in landlord insurance to compensate the property owner for their lost income following damage. If your rental home cannot be lived in because of damage covered by your insurance policy (such as fire), you will be paid your lost rental income until the property can be tenanted again.

Loss of rents can also arise from sources other than physical damage. The risks of bad tenants often causes landlords lost rental income. They might fall victim to this if a tenant inexplicably vacates the property and tenancy. Tenants might also simply stop paying rent to their landlords.

There are intangible risks to landlords that do not apply to your standard homeowner. Hence it’s important for rental properties to have suitable cover for the financial risks of renting, as well as the physical risks.

 

Initio Loss of Rent Cover

A rental property insurance policy with initio has three options for loss of rents cover:

  1. $20,000 (standard and included for free)
  2. $40,000
  3. $80,000 (recommended if weekly rental income is more than $770)

When there is a physical loss at your rental (such as a flood, earthquake or meth contamination) that means the home cannot be lived in – initio will cover up to 52 weeks, or up to the full sum insured for lost rents.

The initio landlord insurance policy also provides ‘Landlord’s Protection’ which covers up to six weeks of lost rents where the tenant has either vacated the property without the required notice, or where they are evicted for not paying rent.

If the tenant can legally stop paying rent under their tenancy agreement, initio will also cover up to six weeks of rent if there’s a prevention of access to the home, or where there’s a failure of utilities such as power.

Initio Loss of Rents Cover

Loss of Rent - Following a Loss or Meth Contamination

52 weeks’ rent, up to 'Loss of Rents' amount selected on schedule

Loss of Rent - Tenant Evicted or Vacated

Up to 6 Weeks Cover

Loss of Rent - Where tenant can legally stop paying rent

Up to 6 Weeks Cover

4. Landlord’s Contents

 

When a landlord offers a tenancy not only are they lending the use of the house to their tenants, but also its contents. In a furnished rental property a landlord owns valuable items as part of the property that need to be covered. Even an unfurnished rental property is likely to have items you own that cannot be covered as part of the house – such as curtains.

Fully furnished rentals; where the landlord supplies all the necessary appliances and furniture required for living, are becoming more and more popular in New Zealand. Contents and fittings are a becoming a significant cost for landlords meaning an all-inclusive landlord insurance policy that protects these is crucial.

If a landlord has a total house fire without adequate landlord insurance at their rental the cost to rebuild will be covered. However, they will be faced with a shortfall when they need to pay to refurnish the property with furniture, white ware and other fittings.

What are considered Landlord Contents?

Landlord contents are broadly specified as fixtures or fittings not permanently attached to the home. If you were to pick up, flip and shake an untenanted house – the landlords contents are those that would fall out. This excludes all personal items (known as personal effects), as these should be covered under the person’s own contents insurance policy.

Most landlord insurance policies will have cover, or an additional option for landlords contents. Some insurers in New Zealand limit landlord’s contents to just whiteware or window coverings. Other insurers offer full landlord contents cover which are capped to their limit, or require an additional premium.

Initio Landlord Contents Cover

Initio’ specialist landlord insurance policy automatically includes $20,000 of cover for landlord contents as standard. For more kitted out properties there is an option to increase this to $40,000 or $60,000.

The initio policy provides unrestricted cover for landlord’s contents. Items covered include:

  • Household goods such as whiteware appliances
  • Electronics,
  • Loose floor coverings,
  • Domestic garden appliances,
  • And even watercraft & outboard motors.

For a complete list of the landlord contents covered please read the full policy wording.

As a landlord it’s important to remember to consider the value of the house itself, as well as the value of any of your contents that are stored there.

 

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