CHOOSING LANDLORD INSURANCE – THE MINE FIELD YOU NEED TO ENTER
There are no shortage of insurance policies that cover losses caused by tenants but the level of cover offered can vary drastically. Choosing the right policy is more than just comparing price and amount of excess.
We are not an insurance agent so we are not permitted to make direct recommendations on types of cover or policies. In our opinion some of the worst policies are offered by banks. You should always enquire with companies that specialise in this type of cover or consult insurance brokers whose business it is to weigh up all the variables for you.
Here are some of the questions you should be asking.
- Many people know that often policies will exclude Malicious Damage by tenants but did you realise that if a tenant deliberately starts a fire this is also considered to be Malicious Damage so it will not be included within the fire section of the policy. This can even affect people who are not renting their property. How so, you ask. They might live in a group of units all covered by the one policy which excludes Malicious Damage by tenants. There is bound to be at least one tenant in the complex and the fire they start might well spread to the rest of the units with disastrous consequences.
- The fire cover in some policies can go further by excluding fire when it has been started by a tenant whether deliberate or not.
- Excesses for loss of rent can vary from zero to $500 or more.
- Excesses for Malicious Damage can be different from the general policy excess and can also vary.
- Some companies will apply your policy excess to every room or item in a Malicious Damage claim. Others will apply it only once which can make a huge difference to the amount you get back.
- The amount you can claim for loss of rent can vary drastically, up to 52 weeks.
- Your claim for loss of rent can be totally void if your agent has not issued the prescribed forms as required by Residential Tenancy Act and associated regulations.
- One of the cheapest policies, as from 1st February, will now cover pet damage.
- Flood can be a part of the standard policy with some policies.
- Your tenant can get out of their lease if they are can show hardship. Some policies will cover this.
- If a tenant dies their lease is void. You will no longer have a claim for rent but your costs for cleaning up the property and disposing of the tenants belongings can be a mine field. Some policies will also cover this.
- You should find out if your policy will cover the cost to clean up a drug lab. The resulting contamination to the building can be a huge cost.
- Legal costs can be significant
- Ensure your policy has adequate legal liability cover. This will cover you if the tenant sues for their injury or other loss.
If your current policy does not come up with a good answer to most of these questions you probably need to start looking for a new one.