Landlords should ensure they have a comprehensive house policy in place, to protect the property whilst it is rented out. Damage could occur to their rental property either by their tenants or by situations out of their control, for example a natural disaster such as a flood or a fire.
Depending on the type of insurance policy, it may also provide protection against a loss of rental income if the property is vacant or damaged and cannot be tenanted for a period of time.
It's important that the insurer is made aware that the policy is for a rental property and not the landlord’s own home, as the risk and terms vary accordingly. If the insurer is not aware the property is tenanted they could, in a worst-case scenario, decline a claim or refuse cover for going forward.
House and contents insurance
Landlords will need to take out their own house insurance policy to cover the property whilst it is rented out. They may also, however, need their own contents policy as well, particularly if the house is being rented out fully furnished.
If the landlord does furnish the rental, then they would need their own contents policy to cover items such as curtains, televisions, furniture etc. but not the tenant’s personal belongings (a tenant should have their own contents policy to cover these items).
Some house policies may include a small allowance for landlord’s contents automatically; however, if you are in any doubt as to how much cover is required always check this with a knowledgeable broker.
Residential Tenancies Amendment Act 2019
Aside from insurance considerations, a landlord should be aware of the changes to the Residential Tenancies Act that were passed on 30 July 2019 as they have important impacts for landlords associated with renting out an unlawful dwelling and the level of liability a tenant has for careless damage to the property.
Under the amendments, if a premise is unlawful for residential purposes, for example the use of garages or sleep-outs that are not deemed to meet minimum rental requirements, and is being tenanted out, then the Tenancy Tribunal has full jurisdiction to take enforcement action against the landlord.
Liability for damage to a rental property
In addition, the changes now mean that tenants have limited liability for careless damage to a property. They are liable for damage up to a maximum of 4 weeks rent or the landlord’s insurance excess based on whichever is lower.
Landlords are also required to provide information as to whether the property is insured or not in the tenancy agreement and what excess amounts are included in the policy. They will need to let tenants know that this information is available to them upon request.
Seek advice from an insurance broker
Ensuring a rental property is sufficiently covered can be challenging. For example, some policies or optional extensions will provide cover for loss of rent, but this may be limited to a certain dollar value and/or only cover certain situations. Other policies may also exclude cover for gradual damage or other less common occurrences.
As there are numerous situations that could arise that pose a potential risk to a landlord’s investment property, or to their ability to generate a rental income, seeking advice from an insurance broker can be critical.
They have in-depth industry knowledge of what different insurers offer under their policies and understand the fine print of exactly what’s included and what is not.
Most importantly, they have relationships with multiple providers so they can find the best policy for your situation that delivers the right level of protection.
Contact an NZbrokers Member with any queries around your insurance requirements as a landlord.