Insurance: expensive, difficult to understand and what you get is not guaranteed. No wonder landlords are divided on this topic. To understand what type of insurance (if any) you may want to select, it's important to understand the differences between them.
House insurance
House insurance covers the structure of your property against fire and other damage. As a rule of thumb, it will also cover anything that is permanently affixed to the house, such as fitted kitchens, baths, tiles, wooden floors, glued/tacked carpets. House insurance is usually required by a lender to obtain a mortgage.
If your house is completely destroyed, the insurance company will normally pay up to the sum insured amount on your policy. There is no guarantee that the sum insured will be enough to cover all rebuilding costs. To help you decide what your sum insured should be and get a more accurate measure you should contact a valuer, a quantity surveyor or a master builder.
Contents Insurance
Contents insurance covers damage and loss of your belongings. It can cover pretty much anything you can walk in and walk out with. It's likely to cover things like blinds, curtains, appliances.
If your property is in rural location, over a certain size, a farm and/or generates income, then insurers are not likely to insure it as a house - you may need a special Farm / Lifestyle policy instead.
EQC Insurance & Fire Insurance
As you are probably aware, the Fire Service in New Zealand is primarily funded by levies charged on property, contents and motor vehicle insurance. EQC (earthquake commission) cover provides natural disaster insurance for residential homes, land, and contents. Most home and contents insurance will also automatically include fire levy and EQC insurance.
House and Contents Insurance costs are on the rise. From 1 July 2017, the New Zealand Government increased the Fire Service Levy to fund a more coordinated fire and emergency service. Also, in line with Budget 2017 announcement, the EQC premium has gone up as of 1 November 2017. The increase was to assist in rebuilding the Natural Disaster Fund that has been exhausted following the Canterbury and Kaikoura earthquakes. Both these changes will result in the average annual premium increase of $116.
Landlord Insurance
This is a tricky one. No two landlord insurance policies are the same. Some landlord insurance cover is supposed to be taken out in addition to your home and contents insurance policy, while other landlord insurance policies may be more comprehensive.
So what are the most common risks that landlord insurance covers?
Intentional damage / theft by tenant
Deliberate damage to properties could be extensive and expensive. Landlord insurance normally covers the cost of repairs up to certain sum.
Loss of rent for malicious damage
Unfortunately, if your property was deliberately damaged, the cost of repairs is not all you have to think about. It is also likely that your property can't be immediately re-rented without some work done to it first. So, you're likely to lose rental income for several weeks while you're returning your property to a rentable state.
Loss of rent due to abandonment or eviction
Landlord insurance can also cover loss of rent due abandonment or eviction.
Loss of rent for accidental damage
Damage caused by accident, carelessness or negligence to the property could be extreme. In cases involving fire or floods, the property may not be rentable for a very long period. It is important to check the rental policy to make sure you have sufficient cover, as policies vary greatly.
Osaki Ruling
The decision in the Holler & Rouse v Osaki case established a strong precedent and changed the rules of the game completely. It left residential landlords liable for accidental damage caused by tenants. So now, if it is established that damage to a property was due to carelessness and the landlord has insurance, the tenant does not have to pay for the damage. If damage was intentional the tenant does not receive the protection of the landlord's insurance. A new bill was introduced as the Government's response to Osaki Ruling. The Residential Tenancies Amendment Bill (no 2) will make tenants liable for the landlord insurance excess (up to 4 weeks rent) in cases when damage is caused by carelessness or negligence.
Gradual damage
Most insurance will cover structural damage to the house but not gradual damage, even though gradual damage is more likely to occur in tenanted properties as tenants are less likely to report small water leaks or the first signs of mould and rot. The application of this cover is usually limited. It's essential to read the small print with this one.
Repairs due to meth contamination
Most insurance will cover you for contamination damage to your house that first occurs during the period of cover and that you discover. There is normally no cover for any contamination damage where any contamination existed or occurred prior to the current period of cover.
Don't assume that just because one of these risks is covered, all of them are.
You'll need to decide what insurance cover is important to you and your property - then use that as a starting off point in narrowing down the different landlord insurance options that you might consider. And if you decide to go ahead with one, make sure you read the Product Disclosure Statements carefully, so you know what is, and more importantly what isn't, covered.
As a myRent customer you can recieve a discounted house and landlord insurance with initio. initio insurance consistently outperforms other house insurers on price, coverage and claims resposiveness. See how it compares to your current insurance or get an instant quote here
The information contained in this article is exclusively for promotional purposes. It does not in any way constitute legal advice and should not be relied upon as the basis for any legal action or contractual dealings. The information is not, and does not attempt to be, a comprehensive account of the relevant law in New Zealand. If you require legal advice you should seek independent legal counsel. myRent.co.nz does not accept any liability that may arise from the use of this information.
