Being a landlord comes with opportunities and risks. There’s rental income and long-term capital growth, but also repairs, tenant damage, and unexpected events to contend with. Owning an investment property isn’t always straightforward, but landlord insurance (also called rental property insurance) can help protect your investment.
If you’re already a landlord or thinking about investing in a rental, this guide covers what landlord insurance includes, why you need it, how to choose the right cover, and what to consider.
What is landlord insurance?
Landlord insurance is designed to protect your rental property against the unexpected. Unlike house insurance, which covers owner-occupied homes, landlord insurance covers the risks that come with tenants. It’s about protecting your rental property and your investment income.
Most New Zealand landlord insurance policies cover:
– Sudden and accidental damage – for example, a tenant leaves the bath running and floods the bathroom.
– Hidden gradual damage – from something like a slow internal pipe leak.
– Third-party damage – covering damage caused to someone else’s property, including your tenants’ contents.
– Natural disasters – such as earthquakes, floods, and storms.
– Meth contamination – a growing concern for rental owners in Aotearoa.
Why landlords need insurance
New Zealand landlords face some unique challenges. Firstly, natural disasters are part of life here. From the Canterbury earthquakes to the Auckland Anniversary floods and Cyclone Gabrielle, extreme weather events are common. The Insurance Council of NZ reported billions in natural disaster claims in recent years, showing us just how vulnerable properties can be.
Methamphetamine contamination is another costly risk. The clean-up costs from meth can reach tens of thousands of dollars, and without the right insurance, you could be left footing the bill as a landlord.
Tenant-related damage is hard to predict. Even with the best tenant screening process, accidents happen. A simple mistake like leaving a heater too close to curtains can cause major fire damage. Under NZ tenancy law, tenants aren’t liable for careless damage exceeding four weeks’ rent or your insurance excess (whichever is lower).And if your rental becomes uninhabitable due to damage, landlord insurance can help cover the loss of rent while repairs or replacements are underway. Landlord insurance provides peace of mind that your investment won’t be derailed by the unexpected.
What landlord insurance doesn’t cover
Like all insurance, landlord policies have some exclusions. These vary between insurance providers, so it’s important you read your policy wording carefully. Common exclusions include:
– General wear and tear (e.g. carpets wearing out over time).
– Damage caused by poor maintenance or neglect.
– Intentional damage by the landlord or anyone they allow in the property.
– Tenants’ personal belongings (your tenants will need their own contents insurance).
Choosing the right cover
Some landlords own one rental property while others manage a portfolio. Some are hands-on, while others rely on property managers. The right landlord insurance should reflect your situation.
When comparing policies, consider:
– Sum insured: Will the policy cover the full cost to rebuild the property?
– Loss of rent: How many weeks or months of rental income would the policy cover if your property can’t be lived in?
– Meth cover: What level of testing and contamination is required before you can claim?
– Liability cover: Does it protect you if your tenant, visitor, or tradesperson gets injured at the property?
– Excess amounts: What will you pay out of your own pocket before the policy kicks in? Raising your excess can reduce premiums, but be mindful that excess applies per incident, not per claim.
Also ask about optional extras. Some insurers offer add-ons for covering abandoned tenant possessions, and landlord’s contents (chattels) like whiteware, curtains and furniture.
What will it cost?
Premiums depend on factors like the size, age, and location of your property, as well as the level of cover you choose. For example, an Auckland apartment might cost less to insure than a large freestanding house near the coast in Wellington due to different natural disaster risks.
While costs vary, most landlords see insurance as a smart investment in protecting rental income and property value. After all, a few hundred dollars a year is nothing compared to losing months of rent or footing a $30,000 meth clean-up bill.When weighing up landlord insurance, ask yourself: what would it cost me to recover if the worst happened, and could I afford it on my own? For most investors, the protection and peace of mind far outweighs the premiums.
Do you need landlord insurance for home and income rentals?
With so many Kiwis turning to second dwellings for extra income, this question comes up a lot. If you’re renting out a granny flat, minor dwelling, or self-contained unit on your property, it’s important to know whether your standard home insurance is enough, or if you need landlord cover. The short answer: it depends on how the space is set up and used.
Self-contained second dwelling
If the flat has its own kitchen, bathroom, and entrance, and you have a tenancy agreement in place, insurers will usually treat it as a rental property. In this case, you’ll likely need a landlord or rental property insurance policy specifically for that dwelling. Some insurers may let you extend your main home policy, but many require the flat to be covered separately with its own sum insured.
Attached granny flat
If the space is attached to your home and shares facilities (like a kitchen), insurers may allow it to sit under your main house insurance policy. But once you’re charging rent and have tenants, you’ll generally need to add landlord cover or specific rental extensions to ensure you’re protected.
Always let your insurer know if you’re renting out part of your property. Not disclosing it could void your cover. Ask whether the rental needs a separate landlord policy, or if your home policy can be adjusted to include it.
Legal requirements
Under NZ tenancy law, you’re legally required to include insurance details, such as whether the property is insured and the excess amount, in the tenancy agreement. If those details change, tenants must be notified within a reasonable timeframe.
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Renting out a property without landlord insurance could leave your biggest asset exposed. Our team can help you compare policies, cut through the fine print, and find landlord insurance that fits your needs and budget. Whether you’re renting out your very first property or managing a whole portfolio, we’ll make sure your investment is properly protected.
Get in touch today for a free, no-obligation chat with one of our General Insurance Advisors.