Landlord insurance - Getting the right cover for your investment

As a landlord, securing the right insurance coverage is fundamental to protecting your investment and ensuring your peace of mind. However, navigating the complexities of landlord insurance can sometimes lead to oversight.

From underestimating the necessary coverage to misunderstanding policy requirements, these mistakes can compromise your security or potentially, lead to financial losses. We asked the team at initio to provide guidance on getting the right cover for your investment.  

Ensure you have adequate cover for loss of rent

Choosing the right amount for lost rent cover is really important as it ensures you are not out of pocket when unexpected things happen. If you don't have enough cover, you could be stuck paying the difference. Think about how much your property earns in rent and what kind of risks it faces to pick the best coverage for you.  Ideally, you want to make sure your limit covers the annual gross rent. 

With initio’s landlord insurance, you're protected if you lose rent for the situations outlined below. This includes both regular rental homes and holiday houses you might rent out. 

When does lost rent insurance help? 

1. Damage to your property: If something like a flood makes your house unliveable, initio will pay you the rent you miss out on while your tenants have to move out and the repairs are being done. Cover starts at $20,000, but you can choose to increase it to $40,000 or even $80,000. This coverage lasts until the repairs are finished, or for up to a year, or until your limit is reached. 
2. Tenants leave or are evicted: If a tenant is evicted for non-payment of rent or if they leave without giving the required notice, your policy has a loss of rent benefit to help you out while you look for a new tenant.  This includes: 
   1. Eviction for not paying rent:  initio will cover up to 6 weeks of rent after your tenants have left.  
   2. Tenant leaves without warning: initio will cover up to 6 weeks of rent until you find someone new. 
      

Remember, meeting your insurance policy’s landlord obligations is essential to qualify for this coverage. 

Meeting landlord obligations 

To ensure you're eligible for lost rent cover, you’ll need to follow your landlord obligations, as set out by your insurance provider. This applies when you manage the property yourself or someone does it for you.

Start by carefully selecting your tenants. This means getting proper identification and references for each adult tenant and, when necessary, checking their credit and Tenancy Tribunal history. Keep records of these checks, and if your insurer asks, you'll need to share these with them.

Insurance provider, initio explained that landlords should collect up to 3 weeks of rent as a combination of advance rent and bond, registered with Tenancy Services. Inspections are a “must-do” and should be inside and out at a frequency of every 3 months or with each new tenant. Make sure you keep photos and notes. If rent falls 14 days behind, send a written notice and visit to see if the tenant is still there. If rent is 21 days overdue, or you spot illegal activities or intentional damage, head to the Tenancy Tribunal. 

These obligations change slightly in specific cases. For homes rented to your employees as part of their job, you don't need to follow rules about rent collection, monitoring, and eviction for arrears. And for short-term rentals, these obligations don't apply for cover against damage and theft by guests. 

Regular inspections ensure you are claiming correctly 

It might seem efficient to combine all small damages from a tenancy period into one claim, paying just one excess. However, this approach is both fraudulent and could transform house insurance into something resembling a property upkeep service. The result? Higher premiums and more claims, making insurance too costly for many. 

Many landlords mistakenly believe that all damages left by a tenant can be covered under a single excess. This misconception can lead to reduced claim payouts or unviable claims if the damages are from separate incidents. When tenants leave, they might leave behind various damages like wall holes, carpet stains, or broken doors.

That’s why conducting regular property inspections is crucial. It helps catch and fix damages early, preserving your property's value and ensuring any insurance claims are justified and fair. Remember, also that expected general wear and tear on any home is not considered an insurance claim, rather a homeowner’s maintenance cost.   

Second dwelling insurance – make sure you have the right cover 

Ensuring you have the appropriate insurance policy for your property, especially when it hosts more than one dwelling, is crucial. Insurance aims to restore you to your previous situation following unforeseen events. While skipping insurance for an extra dwelling on your property might look like a way to save money, it can actually leave you exposed to risk if repairs or replacements become necessary. 

A dwelling is considered self-contained if it includes facilities for cooking, sleeping, living, washing, and personal hygiene, even if these are not located in the same building. Ensuring you have the right coverage for every part of your property is essential for full protection and peace of mind. 

Taking the time to understand and navigate landlord insurance effectively is not just about compliance; it's about ensuring that your investment remains secure and profitable in the long term. Avoiding these common mistakes by choosing adequate loss of rent cover, adhering to landlord obligations, accurately assessing damage claims, and selecting the correct policy for your property setup can save you from unnecessary headaches and financial strain. With careful consideration and the right approach, you can ensure that your property, and your peace of mind, are well protected. 

For more detailed information on how initio can help safeguard your rental investments and to join the growing community of satisfied landlords, visit initio’s website to get a landlord insurance quote in seconds. 

This post is sponsored by initio, a leading insurance provider dedicated to offering innovative and reliable insurance solutions for landlords across New Zealand. 

For more information from initio:

Two dwellings at the same property 

What are my obligations as a landlord? 

Can more than one excess apply to a claim? 

Am I covered for loss of rent?