Do I Need Landlord Insurance?

Landlord insurance is not compulsory, nor is it a legal requirement in New Zealand. However, your investment property is a valuable asset and renting it out does come with some risk. 

Not all tenants will treat your property like you would, there can be gaps in your tenancy that put pressure on finances, and accidents can and do happen. Landlord insurance is a great way to help protect your asset and minimise the risk of financial loss. 

Find out what landlord insurance covers and why you should consider taking out this type of coverage on your rental property.

Income protection from the financial loss of a tenant

Doing your due diligence to choose stable tenants will help keep your rental occupied. 

However, tenant circumstances can change, and while there is high demand for rentals in most cities, that doesn’t mean you won’t be affected by the sudden loss of a tenant. 

Landlord insurance can help bridge the gap if your rental becomes unexpectantly vacant or you have a gap in payments. For example, landlord insurance can cover loss of rent caused by non-payment by tenants (including if you have to evict them) or if the home is uninhabitable due to a loss covered by your policy (like a fire or flood).

Peace of mind when the worst happens

New Zealanders are no strangers to natural disasters. Earthquakes, floods, and heavy rain warnings can all cause damage to your rental property and cost thousands to fix. Unexpected accidents like house fires can also put your rental at risk.

Many policies include insurance cover for damage caused by specific events, including fire, collision by a vehicle, natural disasters, storms or floods.

Protection from accidental or malicious damage

It’s every landlord’s worst nightmare (and why we recommend hiring a property manager), but accidental and malicious is one risk for rental property owners.

It’s important that if you have rented your property out, your insurance company knows that a tenant is occupying it. Failure to do so could affect your ability to make a claim.

Landlord insurance can cover a wide range of damage, including: 

• Cover for accidental damage caused by the home’s occupants up to the sum insured.
• Methamphetamine contamination cover while your home is tenanted 
• Cover for malicious or deliberate damage caused by tenants
• Cover for landlord’s furnishings 

Damage from guests of your tenants isn’t covered in every policy. It’s a good idea to clarify with your insurer about what happens should this type of damage occur.

Coverage from damage caused by pets

If you are going to accept tenants with pets, landlord insurance is a no-brainer. While tenants with pets can make good long-term tenants, animals can cause damage to your property, including scratches to wooden floors, stains on carpets that can’t be removed and damage to gardens and grass areas. Landlord insurance can help cover any costs associated with replacing flooring or redoing the gardens. 

Lowering the risk from renting to short-term tenants

Don’t only consider landlord insurance for your rental. If you own a holiday home or Airbnb, landlord insurance is a must. It’s much harder to do your due diligence on short term guests, especially when using online booking platforms. 

Airbnb has a $1USD Million Host Guarantee cover, but this is not an insurance guarantee and is not regulated by New Zealand’s Financial Markets Authority.

Landlord insurance ensures that you are properly covered. Damage to short-term rentals should be fixed as soon as possible so that your rental is ready for the next guests. Not doing so can result in a failure to meet guests’ expectations and poor reviews. Landlord insurance can be expensive for short term guests. 

Liability protection

As a landlord, you could be held liable to pay damages or reparation for accidental bodily injury

Or if there is an accident at your property that causes damage to someone else’s property.

Choosing the right property manager can make all the difference

As well as landlord insurance, choosing the right property manager can make all the difference. As experienced property managers, we aim to reduce potential tenancy problems from occurring in the first place.  If you are looking for a property specialist who understands how to choose the best tenants for your property, call us on (09) 832 0832.