5 things to think about when insuring a rental property

A rental property can be a valuable investment, but it’s not without its challenges. As a landlord you’ll be footing the bill if things go wrong with your tenants or property, and having the right insurance cover can help. 

Insuring a rental property is a little bit different to insuring a house you live in, and it’s important to understand how your cover works and what your options are, so you can make decisions about how to protect your investment in a way that will suit you. 

1. A house insurance policy may offer you some cover for your rental 

You may decide that you don’t need any special landlord cover for your rental, and choose to only cover the structure of your property by taking out a standard house insurance policy. Just be aware  that when you take out your policy, you will need to specify to your insurer that it is tenanted rather than owner-occupied, and check whether that means there are any special conditions or excesses. 

Remember that house insurance won’t usually cover any furniture you’ve provided or your tenant’s belongings - as a rule of thumb, it will only cover anything that is permanently affixed to the house such as a fitted kitchen, a bathtub or the carpet. 

2. You can add on specific landlord cover 

If you want to, you can buy specific landlord cover – which might be add-ons to your standard home insurance policy, or a separate landlord insurance policy.

These generally cover damage caused by events that are more specific to rental properties, like malicious damage caused by tenants, loss of rental income and your legal liability as a landlord. 

For example, Vero’s house insurance policy has an optional landlord extension which gives cover for things like loss of rent. 

3. Most insurance won’t cover deliberate damage 

Insurance policies are designed to cover accidental damage, which means that if a tenant deliberately damages your property, this generally won’t be covered. 

But landlord insurance policies may offer some limited cover for deliberate or malicious damage. For example, Vero offers an optional landlord extension which covers malicious damage caused by tenants, up to $30,000. 

4. Your policy is really designed for the big stuff, not for small damage or wear and tear 

Insurance policies are usually designed and priced to cover the big stuff that you can’t afford to pay for yourself, and your policy will usually have an excess that means it’s not worthwhile to claim minor damage. 

Over time, tenants might cause minor accidental damage – like multiple stains on the floor – that add up to you wanting to replace the carpet. But the way your policy works is that each ‘event’ of damage incurs its own excess, so a number of individual stains over many months would probably incur a higher total excess  than the claim is worth (unless you can prove the stains were the result of a single incident).

This probably happens in your own house too, but where it gets complicated for landlords is that they may not see the damage accumulating over time if they’re only inspecting a property infrequently, so it feels like one event. But it’s important to keep in mind what kind of damage is just wear and tear requiring routine maintenance, and what kind of damage should be an insurance claim. 

5. You have obligations as a landlord 

While landlord insurance is designed to protect your investment, as a landlord you’re also responsible for taking good care of your property. 

That’s why many landlord covers will include specific obligations you need to meet to keep your insurance valid. These include things like selecting your tenants carefully, actively monitoring rent payments and making regular checks of your property to help you identify problems as quickly as possible and prevents things from getting worse. 

If you’re taking out cover for a rental property, make sure you read your policy carefully so you’re aware of any conditions, or talk to your insurance broker to understand your insurance obligations as a landlord. 

If your tenants accidentally damage your property you may be able to recover your insurance excess from them, but you will need to let them know what your excess is, and provide them with a copy of your insurance policy. Claiming back any excesses needs to be handled between you and your tenant – your insurer won’t be able to get involved. 

If you’re interested in taking out cover for a rental property, a broker or adviser can also give you tips or offer you personalised advice on what level of cover might be right for you. If you don’t have a broker, you can use our insurance broker locator  to find one.