Insuring Investment Property: Report highlights wide choice

Insuring Investment Property: New Report into Landlord Insurance highlights a wide choice for residential property investors

With over 500,000 rental properties around New Zealand, Kiwi property investors are increasingly considering stand-alone Landlord Insurance over home and contents policies. MoneyHub publishes its review on landlord insurance policies and highlights a number of considerations and need-to-knows for anyone considering purchasing a policy.

Tuesday 22 May 2018

A research report released by MoneyHub today aims to raise awareness amongst property investors about the pros and cons of landlord insurance when compared to a traditional home and contents policy. MoneyHub compiled its report in response to the growing interest in landlord insurance after a series of media stories about methamphetamine contamination and intentional property damage by tenants, as well as more insurers entering the market in response.

MoneyHub found that insurers such as Tower and Initio routinely offered more generous coverage, including intentional damage and contents cover up to $20,000 within their standard policies. Many other insurers offered such protection as an optional extra.

MoneyHub’s Senior Researcher Christopher Walsh said:
“There is a common misconception that landlord insurance is merely a bolt-on to existing home and contents insurers, but this is not the case. Landlord Insurance is a superior type of home insurance policy which is tailored specifically for landlords. Policies offer standard home insurance cover and can extend to loss of rent and intentional damage”.

“While Landlord insurance is not compulsory, nor a legal requirement to rent a property, mum and dad landlords were increasingly being offered better cover and payouts as more insurers came to the market. We found some policies had methamphetamine contamination cover as a standard benefit”.

“For anyone doing up a rental and installing new whiteware, drapes and carpets, having a landlord insurance that covers contents could be a great idea to protect the investment in the event of a troublesome tenant”.

“Every landlord insurance policy puts the onus on landlords to be responsible when it comes to picking and monitoring tenants – this included completing a reference check, taking a bond and regularly visiting the property for inspections. Failure to do this could cause problems if and when it comes time to make a claim”.

“Our research highlighted Tower and Initio as the best buy policies; we collected a number of quotes and found that Wellington was relatively more difficult and/or expensive to insure due to the 2016 earthquake and many insurers assessed them on an application-by-application basis”.

“Policies for the most part tended to be similar in price, as a 20 cent EQC levy and 10.6 cent Fire Service levy applied for every $100 of insured property, capped at $276 and $106 respectively. This means that property investors would pay at least $300 in levies on any property insured for over $300,000. When GST is added, insurers’ actual policy fee was around 50% of the total policy price for a home in the $400,000 - $700,000 value bracket.”

“We found Tower and Initio routinely offered more coverage in their standard policies, such as intentional damage and contents cover up to $20,000. Many other insurers offered such protection as an optional extra. Initio even offered replaced value for methamphetamine damage, meaning a property could be bulldozed and rebuilt if no alternative could be found. This cover level differed from all other insurers, who either offered nothing or up to $30,000 for any meth-related consumption of manufacturing.

“And when it comes to knowing what to select as an insured value, many people didn’t know that online replacement cost estimators may give an unreliable number. With building material costs in New Zealand at an all-time high, the replacement amount may mean a property is not rebuilt to the same standard. And local market conditions factor in as well – the cost of rebuilding a home after the Christchurch earthquake was far more than replacing a fire-damaged home in Dunedin due to massive builder shortage”.

“MoneyHub suggests property investors use our best buy policy quote guide and make contact with an insurance broker to try and beat the market price. Brokers were often well placed to know local conditions and specialist policies available”.

MoneyHub published a number of tips when it came to buying and claiming on landlord insurance and policy prices would be updated on a regular basis going forward.
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