Seeking landlord insurance

Question from John updated on 21st January 2014:

Our expert Leanne MacKenzie responded:

Firstly, inform your insurance company that the house is a rental or they may assume the dwelling is owner occupied. This will ensure the appropriate premium is charged and the additional risks associated with rental properties are taken into consideration.
Accidental damage by tenants is generally covered if the insurer is aware the house is a rental property, like if the tenant accidentally drops a hot iron onto lino flooring causing a burn mark. However of greater concern to all involved is ‘malicious’ or ‘intentional’ damage by tenants. Some policies automatically provide cover for this type of damage while other allow for cover to be purchased for an additional premium. However, many policies give no cover at all for this type of loss. There are also sometimes conditions known as “Landlord’s Obligations” and these need to be met, you will likely have to provide proof of this at claim time. These conditions may include obtaining satisfactory references and carrying out regular property inspections. While this can seem a bit over the top, these are acts that a prudent landlord would reasonably be expected to carry out even if they didn’t have insurance as a back-up. 
Damage caused by methamphetamine (aka P) labs is also regarded as malicious and intentional.  If your policy excludes this kind of damage it will also exclude P lab clean-up costs which can easily reach $20,000 to $30,000. Some insurers provide a limited amount of cover while others with more exclusive products provide incentives for landlords to install a meth production detection device and in return will provide unlimited cover for clean-up costs. While the house is being repaired there is every chance you may not be able rent it out, so you are also losing rental income. Make sure your policy includes a ‘Loss of Rent’ benefit which includes income lost as a result of a malicious damage.

Leanne MacKenzie has over 25 years experience in the New Zealand personal property insurance industry. As personal lines manager for Crombie Lockwood she has been instrumental in introducing the important changes that have been made in the sector over the last 12 months. “Every property owner owes it to themselves, as a landlord and a homeowner, to understand the new regime.” Leanne is based in the company’s national office in Auckland.

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