Floods cause the most natural hazard damage to property in New Zealand. Our country has high flood risk meaning many properties lie in or near flood zones. Therefore insurers are cautious when it comes to flood prone houses.
The 2017 Edgecumbe flood was one of New Zealand’s worst in recent history.
If you are looking at buying or getting insurance on a flood zone house, we recommend you follow these five steps.
1. Check the LIM Report
The easiest way to find out if your house is in a flood zone is to read over the LIM report for the house.
If the house has been identified by the council as being at risk to any natural hazards (including floods) this will be included in the LIM report. The Certificate of Title will inform you if a Section 36, 73 or 74 of the Building Act has been issued.
In simple terms, this means when getting building consent on the house a natural hazard risk is declared.
The LIM report should provide you a good overview of the extent of the flood risk to the house.
2. Check online council hazard maps
If you don’t have access to a LIM report or do not want to pay for one, you may be able to find flood risk information online.
Most local councils now release public online Geo mapping for natural hazard risks on houses. Unfortunately, each regional council have different maps so you will need to find the relevant one for your home.
Try searching the internet for your local council’s name and adding ‘hazard maps’ to your search term.
If you can find your councils online mapping tool you will then need to filter through the different natural hazard types. Then enter your address and add the flood zone layers and you will be able to see how and if your property lies over a flood zone. There should also be information available about the extent of the flood risk.
3. Be prepared to pay more
If your house is in a flood zone it is likely you will be able to get cover. But it may not be with your first choice as insurer’s are more likely to decline.
Depending on the extent of the flood risk at your house you may either pay more premium or have a higher flood damage excess.
If we accept cover on your flood zone property we may apply an imposed flood endorsement with a higher excess. An example of this endorsement can be seen below.
Example Flood Endorsement
We will not pay for any costs of additional materials, work or expense required solely to comply with Government or local authority bylaws and regulations, if those costs are required solely to meet the requirement of Government or local authorities to reduce the exposure to a natural hazard at the home.
An excess of $2,500 applies to any claim for water entering the Home as a result of flood, or inundation by seawater, replacing the excess shown in the schedule.
For the purpose of this endorsement, flood means the covering of normally dry land:
i. by water that has escaped or been released from the normal confines of:
a. any lake, or any river, creek or other natural watercourse, whether or not altered or modified, or
b. any reservoir, canal or dam,
ii. by rain water pooling or failing to drain away
4. Check how extensive the flood zone is
Flood risk is spread across much of New Zealand. Some flood zones are higher risk, while others might only be minor risk areas. It’s important to get an idea of the extent of the flood risk. If it’s moderate risk you may not be willing to take the risk while if it’s minor you might be willing to accept it.
Flood zone risk are usually referenced by their yearly frequency. The most common flood zones are 100-year flood zones. This means research and history predicts there is a 1 in 100 chance of a flood event each year.
1 in 50 year flood zones are also common and means a flood event is twice as likely. A lower risk flood zone might only be a 1 in 200 year chance.
You can generally find this information either on the LIM report or mentioned on the council data.
5. Check the property isn’t at risk to other natural hazards
If you have a LIM report or found information online, it also pays to check the house is not at risk to other natural hazards.
Another common risk to houses in New Zealand are landslip/subsidence, or erosion if the house in near the ocean.
Places like Whangarei are particularly prone to both landslip and flooding. It’s also common for flood zones to be around coastal erosion areas. Checking this will give you a better understanding of the overall risk to the home.
How to get insurance on my flood zone home?
You can apply for insurance on your flood zone property with us by getting an instant quote via the button below. Please note the flood risk will need to be disclosed to us when you send an application. If this isn’t disclosed you risk having a future claim declined for non-disclosure.
If you would like to proceed with your quote, select the ‘Buy Cover’ option at the bottom of the quote. You will then need to disclose the flood risk and any other relevant information during the declaration questions in the application.
This will submit a referral to us which we can then review. You will not have to pay for the policy at this stage.
We may confirm to provide insurance cover on your home, or we will ask for further information if required.
Flood & Landslip Questionnaire
Otherwise you can complete our Flood and Landslip Questionnaire and email it to [email protected] along with any supporting documentation. We will then review your application and confirm if we can provide insurance on your home.
If you have suffered a flood and are wanting advice on your claim, please refer to our helpful claim guide.
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.
Homes that are rented out to short-staying paying guests are experiencing booking cancellations and reduced occupancy (loss of income) due to fears and government restrictions relating to Covid-19. We take a look at whether insurance provides cover.
Covid-19, also known as the Coronavirus has caused major impact to visitor travel arrangements. The reduced sentiment to travel as well as New Zealand’s move to protect itself from the rest of world with Government imposed restrictions on travel and self-isolation will and has lead to holiday home (Bookabach, AirBnB etc) cancellations and reduced future bookings.
So, as a AirBnB or Bookabach property owner is there insurance for loss of income where there is no physical damage to the property?
The short answer is No. Let’s explain;
Most insurance policies include a Loss of Rents provision that specifies an amount of cover (e.g. $20,000) and a payment period (e.g. 12 months)
This cover is triggered by a physical loss to the home or property that results in house being unliveable.
Some common examples include, a fire at the property, a burst pipe that floods the house, earthquake damage or rising flood waters.
The policy responds to cover the damage from these things and also the associated loss of rental income while the damage is being repaired.
So, if the property is a holiday home and is damaged the loss of income would include the confirmed bookings you know about that need to be cancelled, and the other future bookings you miss because the property is not available to be booked. Its the perfect solution…. until non-physical things like Covid-19 come long.
No physical damage – the Covid situation
As Coronavirus (or any other illness, virus or disease for that matter) does not cause any physical loss to the property, it does not trigger the loss of rents cover. The key component for cover is missing.
But wait, what about cover loss of rents due to tenant eviction and prevention of access and the like – that’s not physical damage? Yes, some policies like Initio, have a special benefits that provide loss of rental income cover from other causes that are not necessarily physical.
The one that is most relevant here is the ‘prevention of access’ policy benefit. Prevention of access relates to not being able to access the property, and typically comes in the form of a road closure or a washed out driveway for example. While Covid-19 is causing bookings to be cancelled, access to the property is not actually prevented, meaning that this part of the cover does not provide any assistance for Corona virus related income losses.
It is also important to note that most house insurance policies out-rightly exclude cover for “financial loss or expense of any type in connection with a Notifiable Infectious Disease under the Health Act 1956”.
While this provides little comfort to holiday home and own home owners who rent out their properties to short term guests, it does mean that home owners can make informed decisions about how to manage their lower income risk over the coming months.
About Initio
Initio is a New Zealand-based online house insurance provider. Founded in 2011 by a couple of Kiwis, Initio set out to change the broken insurance industry by using technology to put control back into the hands of the customer.
Having completed over 35,000 automated insurance transactions, Initio’s market-leading policies can be quoted, bought and amended online – all in an instant.
Initio is underwritten by NZI, a business division of IAG New Zealand Limited.
A landlord can hold their tenant responsible only in certain circumstances. Tenancy Tribunal decisions are an insight into how landlords and tenants are interacting. We show you how we think the Residential Tenancies Amendment Act 2019 is working for landlords and how it interacts with landlord insurance.
Three things you should know about tenant damage
1. A tenant can be held fully responsible for intentional damage
A tenant who deliberately causes damage can be held liable, and the landlord can request that the tenant pays for damage.
If the landlord has insurance for deliberate damage they can lodge a claim with their insurer. The insurer will pursue the tenant to pay back for the costs, including the landlord’s insurance excess.
2. A tenant can be held partially responsible for careless damage
If a tenant carelessly causes damage they can be held responsible, but only to the insurance excess or four weeks rent (whichever is less).
The landlord’s insurance policy also benefits the tenant. If the tenant carelessly damages the property they can rely on the landlord’s insurance policy to cover the cost of the damage. The tenant’s liability should be considered on a per event basis, meaning that if there have been multiple events of careless damage, the tenant (and the landlord), can be up for more than one excess. Learn more about excess per event.
3. A tenant cannot always be held responsible for accidental tenant damage
Where damage caused by the tenant is accidental, the responsibility can fall back on the landlord. This means the landlord pays the landlord insurance excess.
This is a fundamental flaw with the August 2010 change to the act which is silent on ‘accidental damage’, as it’s not always clear whether tenant damage is ‘careless’ or ‘accidental’. Doing something like knocking and leaving a hot iron on the carpet is not considered careless by the Tenancy Tribunal, and is therefore the landlord’s responsibility to pay the insurance excess. See Braziers Ltd v Guttmann [2020] TT 4251455.
This case shows the Tribunal’s approach to the difference between careless damage and accidental damage. It confirms the two types of damage are treated differently when determining tenant responsibility and ultimately who pays the landlord insurance excess.
Braziers v Guttman 2020
A landlord (Braziers) took their tenant (Guttmann) to the Tenancy Tribunal to obtain compensation for damage. The Landlord alleges that a patch of the living room carpet was melted during the tenancy, and claims the cost of replacement of the carpet in that room from the tenant of $772. The tenant accepted that the surface of the carpet was melted when they accidentally knocked over a hot clothes iron. The tribunal confirmed that;
The landlord must prove that damage occurred during the tenancy and is more than fair wear and tear, and if established the tenant must;
Prove that they did not carelessly or intentionally cause or permit the damage.
The Tribunal commented that where the damage is caused carelessly, and is covered by the landlord’s insurance, the tenant’s liability is limited to the lesser of the insurance excess or four weeks’ rent.
he tribunal decided that damage to the carpet was more than fair wear and tear, but because the damage was accidental rather than careless or deliberate, there is no liability to the tenant. The tenant was not held responsible for the cost to replace the carpet and was not held responsible for the insurance excess.
Accidental Tenant Damage vs Careless Tenant Damage
The Residential Tenancies Act 2019 has done a poor job at defining a difference between accidental and careless damage. The act is silent on accidental damage caused by tenants, and we are now seeing this in the Tenancy Tribunal.
Accidental damage is something caused by the tenant, but is outside of the control of the tenant (e.g. accidentally tripping over and causing damage). Whereas careless damage is loss that is caused through lack of attention or concern. The Act holds the tenant partially responsible for the careless damage but it is silent on accidental damage.
All damage caused by the tenant, whether accidental or careless should be the responsibility of the tenant (meaning the lesser of landlord insurance excess or 4 weeks rent). But unfortunately that is not how the Act has been interpreted by some recent Tenancy Tribunal cases.
If the landlord and tenant cannot agree whether the tenant is liable for the damage, the landlord can apply to the Tenancy Tribunal for the matter to be resolved. Copies of relevant insurance policies, photos of the damage, and receipts or quotes for repair should be included to support the application.
Why can’t the tenant use their own insurance to pay for the damage?
Gone are the days where tenants were completely responsible and carried their own insurance, which the landlord or the landlord’s insurer could rely on to pay for the cost of damage to a rental property. Historically the tenant could carry their own contents insurance cover, and this cover would include the tenants liability of at least $1m. For many landlords it became a condition of the tenancy that the tenant provided confirmation of their own contents insurance cover. This meant that if the tenant burnt the house down the landlord’s insurance company could get the money back from the tenant’s insurance company.
Two major things changed this approach:
Court of Appeal decision on the Holla v Osaki
This was a landmark ruling for landlords. It established that landlords and landlord insurers could no longer recover the costs of damage from tenants. In this case it was a $216,000 worth of damage caused by the careless action of tenant by leaving an unattended pot cooking on the stove. Learn more about this decision here.
Residential Tenancies Act 2019 This act reverses the affects of the Holla v Osaki decision by:
Bringing back some responsibility for tenants who cause careless damage. This responsibility is limited to the lesser of the landlord’s insurance excess or 4 weeks rent.
Establishing that the tenant is fully responsible for intentional damage and that the tenant cannot rely on the landlord insurance policy for this. Note that tenant contents insurance policies do not provide cover for damage that is intentionally caused.
Important: We believe that for the benefit of landlords, and to avoid confusion, accidental tenant damage and careless tenant damage should be treated exactly the same. Meaning that the tenant should be held responsible and therefore pay the applicable landlord insurance excess (or up to 4 weeks rent whichever is less). Initio calls on the Government to provide guidance or better still, update the legislation so that it is clear.
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.
I’ve always been interested in property investing. I purchased my first property when I was 19 years old and got the property investing bug. In the years following I acquired additional rental properties. There is something about land and housing that makes perfect sense as a long term investment.
My passion for property led to the founding of initio in 2009, a digital insurance provider that specialises in landlord insurance.
I started off self-managing my properties. This helped me get a handle on what a self managing investor and property manager goes through. Being able to practically work through the landlord obligations, in order to meet the requirements of an insurance policy, are invaluable to us as an insurer of rental properties.
What I found from self-managing properties
With good tenants, there is little work in managing the property. The rents are paid on time, and an easy inspection would take place every few months. This might sound familiar to most landlords. What will also be familiar is the bed egg tenant that makes you question why you invest in property.
Some tenancies require far more work than others. Chopping and changing tenants, with less reliable rent payments meant I was spending more time monitoring and managing them.
Between this, a growing family, and businesses, I no longer had the time and I wondered whether engaging a property manager was the solution.
Traditional property managers
I noticed a crucial thing with the traditional approach of property managers, where they take a set percentage of the rent (between 7-10%) irrespective of the amount of work involved (i.e. regardless of whether the tenant is easy going or just plain hard work). I get this approach – it’s very similar to insurance in that everyone contributes a similar amount and some people use the resource more than others.
What I really wanted was a ‘user pays’ approach, that was heavy on technology, so that I could understand where the costs were being applied. I also wanted to be able to manage some things myself. I didn’t necessarily require the full services of a manager and I wanted transparency. I wanted more flexibility.
…… Enter KITT Property Management
This is when I came across KITT. They take a unique approach to pricing of property management, and like initio, they use technology to automate processes, provide transparency, and save my time.
Pricing
KITT has a unique and very fair pricing model. Rather than a percentage of the rent, KITT charge a flat $35 monthly fee which gives me access to a personalised KITT dashboard and KITT handle the rent payments, and (importantly) any arrears.
As for finding a new tenant, and inspecting the property KITT do that too (if you don’t want to do it yourself that is). It’s a pay as you go approach that means you pay $500 for a new tenant, and $100 for an inspection.
For my property in Beerescourt Hamilton, which rents for $500 per week, over the next 12 months I’ll save over $1,500 compared to traditional property management services. That’s really important to me for this property where the gross yield is already sub 5%.
So it’s really as much or as little as you want, and it works for me perfectly.
The traditional one-size-fits-all pricing structure may work for some investors but I really think you have to consider your property as you would a business and ensure that the input of funds is commensurate with the output of service.
Property management meets technology
So KITT’s combination of fair pricing and use of technology is what I love the most. Like initio, they have developed a custom member log-in where I can see what’s happening, including some very cool reporting showing the financial performance of a property.
Having your records in one place and a built in accounting system is more important than ever for property investors. I need on-demand access to leases documents, insurance certificates, insulation certificates, tenant details, upcoming inspections, rents, invoices, and more. And soon tenants will be able to report maintenance on the KITT Tenant’s App.
It’s horses for courses
I have really enjoyed my experience so far on the KITT platform. I suppose you could say I am half-in when it comes to the management of my residential property, and the KITT system gives me the flexibility to do this. If you are completely hands-off with your property investments and just want KITT to manage it and leave you alone, you can do this too.
I am super excited to see what KITT has in store for the future. While they are only ‘on the ground’ in Dunedin at present, they have big plans to bring their fair, and automated property management approach to the entire country.
Initio’s landlord insurance policy requires landlords to meet the ‘Landlord Obligations’ for cover under the Landlord Protection and Meth Contamination extensions. The cover in these extensions are:
Landlord’s Protection
Malicious damage by tenants, and associated loss of rents.
Theft by tenants.
Loss of Rent following a tenant vacating the property.
Loss of Rent following a tenant eviction for non-payment of rent.
Meth Contamination, and associated loss of rents.
If a landlord has a property manager, it is usually the property manager’s responsibility to meet the obligations. Otherwise, the landlord will need to meet these themselves.
If you don’t meet the Landlord’s Obligations all the standard cover included in the policy remains in place. You are still covered for natural disasters such as an earthquake as this does not involve the risk of the tenant. However, if you do NOT meet the obligations but then lodge a claim for meth contamination at your property, your claim may be declined.
Landlord’s Obligations
You, or the person who manages the tenancy on your behalf, must:
1. Exercise reasonable care in the selection of the tenant(s) by at least obtaining satisfactory identification 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.
2. Keep written records of the pre-tenancy checks conducted for each adult tenant, and provide to us a copy of these if we request it.
3. Collect a total of 3 weeks’ rent in any combination of rent in advance and bond that will be registered with Tenancy Services.
4. Complete internal and external inspections of the home at a minimum of 3-monthly intervals and the relevant residential dwelling upon every change of tenant(s).
5. Keep written records of the pre-tenancy checks conducted for each adult tenant, and provide to us a copy of these if we request it.
6. Keep photographs and a written record of the outcome of each inspection, and provide to us a copy of these if we request it.
7. Make application to the Tenancy Tribunal for vacant possession in accordance with the provisions of the Residential Tenancies Act 1986 if: (a) the rent is 21 days in arrears, or (b) you become aware of any illegal activity by the occupant(s) at the home, or (c) intentional damage to the home is caused by the occupant(s).
If the home is provided to and occupied by your employee as part of their employment package with you, then obligations 3, 6. and 7.(a) do not apply.
If the home is occupied by short-term paying guests such as a AirBnB or BookaBach, then the obligations do not apply to have cover for damage and theft by guests.
