Is landlord insurance worth having in New Zealand?

Is landlord insurance worth having in New Zealand? | Insurance Business New Zealand

Is landlord insurance worth having in New Zealand?

Although not legally required, taking out landlord insurance can yield a lot of benefits for the more than half a million residential rental property owners in New Zealand.

This type of coverage can help pay off the cost of repairing damage to their properties caused by tenants and natural calamities. It can also cover financial losses if the property has become unsuitable for living. Landlord insurance can also help rental property owners pay for medical expenses if someone suffers an injury while inside the property’s premises.

But navigating landlord insurance policies and procedures can be a complicated endeavour, especially for the mum-and-dad investors taking up the vast majority of New Zealand’s residential rental property market. For many of them, enlisting the help of an experienced insurance broker is key to picking the policy that fits their needs.

What does landlord insurance cover?

Part of what makes it difficult to choose which policy suits a landlord’s specific needs is that each policy varies from insurer to insurer, so it is essential for rental property owners to carefully read and understand the fine print before settling on a choice. Typically, landlord insurance covers the following:

Repair or rebuilding costs

This includes the cost to repair or replace the rental home and its contents if these have been damaged by man-made disasters and natural calamities, including earthquakes, hurricanes, fire, flood, theft, and explosion. The tenants’ personal belongings, however, are not covered.

Intentional damage caused by tenants

One of the biggest risks of renting out a property is getting bad tenants. Some tenants deliberately cause damage to the home, especially during an eviction. Landlord insurance can help pay for such damage. Some policies, however, do not cover intentional damage done by someone not living in the property.

Loss of rent

If the house becomes uninhabitable due to damages, landlord insurance can help cover for the financial loss - typically to a maximum of $20,000, or equivalent to 12 months of rent.

Legal liability

This covers for any damage caused by the property to a third party. The amount varies depending on the type of policy and the insurance provider, but often ranges between $1 million and $20 million.

Methamphetamine contamination

If the rental property has been used as a methamphetamine lab, landlord insurance can help cover the cost of the clean-up, repair, and possible rental loss caused by the contaminating drug.

What are the exclusions?

Although some policies provide coverage for unpaid rent, there are others that do not, stating that it is a risk best managed by the rental property owner.

Gradual damage or those that build up over time causing major damage to the property, such as leaking pipes or molds, are also not covered, even though these are more likely to happen as tenants are less likely to report small leaks or the first signs of molds or rotting.

The mess that renters leave when they move out are also not considered damage, so landlords will not be able to claim the cost of cleaning it up. 

What should landlords do to be eligible for a claim?

Having landlord insurance, however, is not enough to make a claim. Rental property owners must also do their share in minimising risks. Here are some of the steps landlords must take to be eligible to make claims, according to financial intelligence website Money Hub.

  • Select tenants carefully and obtain a reference
  • Collect bond and rent in advance
  • Complete property inspections at least twice a year
  • Send letters to tenants when rent is 14 days in arrears
  • Make an application to the Tenancy Tribunal for “vacant possession” at 21 days in arrears – which means the tenants are ordered to leave the property

Top landlord insurance providers in New Zealand

To find out which insurance companies provide the best landlord insurance in New Zealand, Money Hub reviewed the different policies offered by the country’s biggest names in home insurance. The financial intelligence firm obtained quotes for three types of properties – an Auckland home, a Dunedin student flat, and a Wellington villa – and compared the features of each. What the company came up with is a table with a comprehensive comparison of each insurer’s best policy.

Tower Insurance and Initio were Money Hub’s top picks for having the most comprehensive landlord insurance coverage. Both the insurer’s policies offer financial protection for intentional damage caused by the tenants, loss of rent if the home cannot be physically rented, and contents damage or replacement up to $20,000. The insurers also offer good deals to attract new customers and provide quotes in just 10 minutes.

The financial intelligence website also chose Initio as having the best methamphetamine protection policy, which offers up to $30,000 coverage for damages caused by meth consumption and up to the sum insured for damages caused by the manufacture of the drug. The policy also covers loss of rent of up to $20,000, while the property is being repaired or rebuilt due to contamination.

Here is the list of the top landlord insurance providers in New Zealand, along with what their policies cover, according to Money Hub’s research. List correct as of October, 2021.

1. Tower Insurance

Policy name: House Insurance – Landlords Plus Cover
Landlords’ fixture and fittings cover: $20,000 limit
Malicious damage cover: $20,000 limit per event, no cover for theft
Methamphetamine cover: $30,000 limit
Loss of rent due insured event: Up to 8 months
Loss of rent due to non-payment: Up to 8 weeks
Liability coverage: $20 million limit

Read more: Tower introduces sustainability benefit for policyholders

2. Initio

Policy name: Initio Lumley Safe and Sound
Landlords’ fixture and fittings cover: $20,000 limit with option to increase to $40,000
Malicious damage cover: $25,000 limit
Methamphetamine cover: $30,000 limit (damage due to consumption); up to sum insured (damage due to manufacture)
Loss of rent due insured event: $20,000 limit or maximum of 12 months with option to increase to $40,000
Loss of rent due to non-payment: No cover
Liability coverage: $2 million limit

Read more: Initio extends meth inspections period for member tenants

3. AMP

Policy name: Everyday Plus
Landlords’ fixture and fittings cover: $25,000 limit
Malicious damage cover: $25,000 limit
Methamphetamine cover: $30,000 limit
Loss of rent due insured event: Up to 12 months
Loss of rent due to non-payment: Up to 8 weeks
Liability coverage: $1 million limit

4. State

Policy name: Landlord Insurance
Landlords’ fixture and fittings cover: $10,000 limit with option to increase
Malicious damage cover: $25,000 limit
Methamphetamine cover: $30,000 limit
Loss of rent due insured event: Up to 12 months
Loss of rent due to non-payment: Up to 6 weeks
Liability coverage: $1 million limit

5. AA Insurance

Policy name: Landlord Insurance Policy
Landlords’ fixture and fittings cover: Optional
Malicious damage cover: Optional with $10,000 limit
Methamphetamine cover: $30,000 limit
Loss of rent due insured event: $20,000 limit up to 6 months
Loss of rent due to non-payment: Up to 8 weeks
Liability coverage: $2 million limit

Read more: “We can start being more proactive with preventative measures” - insurer

6. AMI

Policy name: Premier Rental Property Insurance
Landlords’ fixture and fittings cover: Optional, covered restricted to a defined event
Malicious damage cover: Optional with $3,000 limit
Methamphetamine cover: $30,000 limit
Loss of rent due insured event: Optional, up to 6 months
Loss of rent due to non-payment: Optional, up to 8 weeks
Liability coverage: $1 million limit