It's worth reviewing your premiums and ensuring your adequately covered
If you’re renting out a property then Landlord Insurance is a MUST. This comparatively small outlay could protect you from potentially enormous financial costs. However, it’s important to know how much insurance you should be paying each year.
What you want to be covered for;
- Loss of rent – up to 12 months or $20,000 following damage to your house
- Deliberate damage – up to $25,000 for damage or theft by your tenants
- Meth contamination - $30,000 of cleaning cover and additional loss of rent
- Landlord contents - $20,000 of standard cover, with options to increase
Even with the most well-behaved tenants your property is still at risk of natural disasters, fire, floods and theft, not to mention accidental spillages and breakages. But there's no point paying over the odds for this protection. Here's how to cut the cost of Landlord Insurance without compromising on cover.
1. Combine landlord policies
Landlords have a variety of insurance needs, including building cover, contents cover, liability insurance and accidental damage cover. Some policies can be packaged together to offer better value for money, or specific clauses can be built in that negate the need to take out added cover elsewhere. Additionally, if you have more than one property you can usually save by insuring your whole portfolio with one company.
2. Choose a specialist landlord insurer
There are plenty of insurers ready to offer landlord cover but specialist landlord insurance brokers may well prove better able to give quotes without unnecessary bloat, so shop around for cover.
3. Get the correct rebuild value
Landlord building insurance requires you to provide a rebuild value for your property. This is the estimated cost of reconstructing your property from scratch and not, as is commonly assumed, the market value of the dwelling.
With the cost of building materials increasing significantly over the past couple of years it's important that you get the most realistic and current figure possible and that you review your sum insured regularly.
To calculate your home’s sum insured the Cordell Sum Sure Calculator is a free, easy to use online tool that guides you through the estimation process. However, a rebuild valuation from a registered valuer or quantity surveyor provides a more accurate sum insured.
4. Consider increasing landlord insurance excesses
Many excesses on landlord insurance policies hover around the $500 mark, but policies will be cheaper if you're prepared to bump up this amount. For landlords able to shoulder the cost of smaller claims from their cash-flow or savings, this can be an effective way of bringing policy costs down.
A note about careless damage: On 27 August 2019, new legislation came into play which affects tenants’ liability for damage. If tenants or their guests carelessly damage a rental property, they are liable for the cost of the damage up to four weeks’ rent or the landlord’s insurance excess (if applicable), whichever is lower. Landlords can’t ask for or accept more than that limit. Insurance companies can’t chase tenants on the landlord’s behalf for the cost of repairs for careless damage.
5. Do you need contents insurance?
For landlords renting out furnished properties an element of contents insurance is a must. However, if your property is unfurnished, or the value of the furnishings have minimal value, you might consider bypassing contents insurance altogether, if you believe the cost of the policy would outweigh any benefit in a claim.
6. Minimise vacant property periods
Generally, insurers aren't keen to cover a property that sits empty for extended periods of time (usually more than 30 consecutive days) due to the increased risk of vandalism and burglary. If your property will be vacant for a considerable duration, you'll need to purchase additional cover such as unoccupied property insurance, or risk your existing cover being ruled void. As such, you'll save money on insurance by ensuring the property is continually occupied. Important if you are renovating…
7. Don't scrimp on your policy
It's tempting to go for the cheapest policy to try and cut costs. However, if you need to make a claim and you're not adequately protected you may end up footing an enormous bill. Choose a policy that offers good value, but most importantly, one that offers the cover you need should something go wrong.
8. Shop around
As always, the age-old advice is to shop around and compare quotes. While landlord insurance is a niche type of insurance, there are still a number of providers out there vying for your business.
The New Zealand Property Investors Federation (NZPIF) partner with Initio Insurance and if you’re a member of your local property investors association you can get a saving on your premium. Get a quote in seconds from Initio here.
As a rough guide, in Christchurch for an average three bedroom house with a $500,000 rebuild the annual payments should be somewhere around $1500 - $1700.
Now might be the time to review your premiums and ensure you’re covered adequately and paying a fair amount.
An active investor with her husband Hamish, Claire loves to inspire & inform others, all whilst juggling three little boys and living her mantra to eat well and travel lots.