What Does Landlord Insurance Cover?
1. Damage by Tenants
When your property is occupied by people you generally don’t know you can’t be certain of what they get up to. Damage by tenants serves as a big risk to landlords and is a common insurance claim.
There are three categories of tenant damage landlords face being; accidental, careless and deliberate.
Accidental damage could be where a tenant forgets to turn the bath off and floods the bathroom. Careless damage is more ambiguous, but might arise where a tenant lights a small bonfire next to the house that ends up causing damage to the property. Finally, deliberate (or malicious) damage is intentional damage by a tenant. Think vandalism, punching holes in walls or meth contamination.
A broad landlord insurance policy that cover all forms of tenant damage is essential for landlords. A standard Own Home insurance policy will not cover any intentional damage caused by occupants of the property.
Can Tenants be held liable for damage?
The 2016 Holler vs. Osaki Court Case muddied the waters for when a tenant can be held liable for damage. Changes to the Residential Tenancy Agreement Act in July 2019 also implemented further adjustments for who pays for damage.
If damage by a tenant is deemed accidental, the landlord is responsible to cover the damage and their insurance excess. If a tenant causes careless damage they can be held liable for the cost of repairs. However, following the regulatory changes their tenants liability is now limited to the lesser of four weeks rent or the landlords insurance excess. This means adequate landlord insurance is more important than ever as further restrictions have been put in place for collecting repair costs from tenants.
When damage by tenants is deliberate, you may be able to hold your tenant liable. However you will likely have a hard time proving that it was deliberate, end up in court, and then if you’re lucky, get drip fed $5 a week.
The difficulties in recovering funds following intentional damage by tenants means having an insurance policy with cover for malicious damage is essential for landlords. If a tenant vandalises your property, you can claim the repair costs under your insurance. The insurance company will pay out and save you the troubles of collecting the funds from the tenant – as they can then seek recovery from the tenants themselves.
Initio Tenant Damage Protection
Initio provides full cover up to the replacement sum insured of the home for accidental or careless damage by tenants.
The ‘Landlord’s Protection’ extension on initio’s landlord insurance policy provides cover for intentional damage, vandalism and theft by tenants. This covers damage caused by tenants, paying guests, or person who occupies the home – and any guest associated with these people. The Landlord’s Extension benefit covers up to $25,000 per event for malicious damage claims.
If the tenant damage is major and caused by a fire or explosion, initio will cover over $25,000 and up to the full sum insured.