Landlords Insurance Q&A – what you need to know about insuring your investment property.
Recently we were approached by the Auckland Property Investors Association to do a brief Q&A on landlords insurance, and some of the risks that landlords face in the modern market.
You can find some of the common questions and answers here. For more specific questions, you can always head over to our FAQ.
Q: Why do property owners take Landlord’s Insurance?
A: We have found that landlords tend to be quite sensible with their insurance decisions. The main driver for getting insurance is basic protection against the big loss risks such as fire, flooding, earthquake, and other natural disasters.
Sometimes current events will motivate landlords to seek cover for specific risks such as meth, or damage by tenants, but the “average landlord” still looks mainly to get cover for those big loss risks.
Q: What is the biggest risk for landlords and property owners?
A: The single most common cause for claims is leaking water pipes, especially in older homes where maintenance has not been carried out or has fallen behind.
Regarding what is costliest, no surprise that fires caused by wiring/electronics is the most damaging source. One of the most common sources is overloaded multi-plugs and wall sockets, especially where the multi-plugs are older/low quality.
Q: Insurance is one of those peace-of-mind expenses that people want to have but don’t want to claim on. What advice is there for investors to manage their insurance costs?
Depending on the provider and type of claims, it is true that too many claims will push up the premium. At the end of the day, insurance is there to be claimed on.
The best approach is to ask your insurer if they have any form of no-claims bonus or increase if a claim is made. While claiming with Initio will not penalise you in terms of premiums, other insurers may have a different approach. If the claim amount is just over the excess, it is worth considering not lodging.
The best advice to manage your costs is to select as high an excess as you can comfortably afford. This means you are protected against the major events, but due to fewer claims, you will end up spending less overall on your insurance bill.
Q: Are NZ landords adequately insured?
Unfortunately, not always. The Initio philosophy is to provide cover that ticks all the boxes right from the get-go. But insurance is a competitive market and some policies, while cheaper, do not include basic covers such as gradual damage, or even deliberate damage caused by tenants. If you are entirely focused on being a price-chaser than you could become underinsured.
If you have any questions or comments regarding the article, you can contact us to find out more.