If you are a landlord renting out your property to tenants, having a comprehensive house insurance policy in place that states that your house is being tenanted will ensure that your financial investment is protected against a wide range of risk factors.
There are various criteria that will determine the annual premiums you pay for a rental property, and lower premiums may not necessarily equate to having the right cover. The most important consideration as a landlord is to make sure your property is properly insured even if that means that you pay a bit more.
Knowing that your property investment is covered in the event that you need to make a claim provides peace of mind. It also mitigates the risk of expensive costs associated with having to make repairs or rebuild should your rental be extensively damaged by a fire or natural disaster such as an earthquake or flooding.
Factors that influence property policy premiums
Your annual insurance premiums for your rental property will depend on a range of factors. An insurer will take into account the age, condition, location and ‘sum insured value’ of your house based on what it would cost to build it from scratch, should it be destroyed by a natural disaster or other damage.
Generally a rental property will cost more to insure than an owner occupied property due to the increased risk for an insurer, with the owner not being there themselves to keep an eye on things all the time. Also, due to tenants moving in and out, there is a greater likelihood that damage could be done to the property.
Considering that an investment property is an expensive asset, it makes sense to mitigate the risk of a financial loss due to unforeseen circumstances by having a good house insurance policy in place with an accurate replacement sum insured. A good policy will include cover for the property (and its contents where applicable). However, it’s important to note that it does not include cover for the personal property of your tenants.
Not all insurance policies will provide the same level of cover, and cheaper premiums may mean that you are not insured for some events or situations. It pays to talk to your broker regarding what the best policy is for your unique circumstances so that you are not left exposed to financial costs should something happen that you hadn’t considered.
Other factors that can influence your property policy premiums
There are some additional factors that an insurer may take into account when setting your policy premiums, such as for example, having an alarm system in place may help reduce your premiums. They may also offer a multi policy discount if you have more than one insurance policy with them. A good insurance broker will have knowledge of multiple types of policies to consider through their relationships with a range of insurers. It’s worthwhile consulting with a good broker to find out your options and what you need to consider to make sure your rental is correctly insured.
The most important thing to keep in mind when arranging insurance cover is that it’s not all about cost. Should a catastrophic event occur that causes extensive damage to your property, such as an earthquake, most landlords would agree that it is well worth paying annual premiums to have a comprehensive house insurance policy in place, with accurate sums insured.
Damage to your property caused by tenants or natural disasters
When you rent out your house, you hope that your tenants will look after the place as if it were their own. Unfortunately, the reality is that not all tenants are good tenants and things can go wrong. For example, methamphetamine contamination of a rental property can cost a landlord a significant amount of money to get professionally cleaned, or in a worst-case scenario have internal walls and ceilings replaced.
It is recommended that you talk to a broker to find out exactly what your policy wording covers so that you are not caught by surprise should your tenants cause damage to your rental in situations that you are not aware of, or have not considered could pose a serious risk.
In addition, damage to your rental property from large-scale events such as floods, fires or earthquakes can be extremely costly which is why it’s crucial that you have a comprehensive house insurance policy in place to provide protection should you need to make a claim.
As recent events such as the Canterbury and Kaikoura earthquakes have highlighted, the risk that natural disasters pose for property owners, particularly in parts of the country where there is an elevated risk of these types of events occurring, can be devastating.
The knowledge and experience of a broker can be paramount here, to ensure that you get everything you are entitled to under the policy wording and to have total peace of mind that you have the proper cover should the worst happen.
Contact your local NZbrokers member with any queries around your insurance requirements as a landlord.