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Insured and Informed: The Power of Routine Insurance Evaluations

February 20, 2024

Rental properties generate income and grow in value over time, but they can also come with unique risks and costs. One common question for landlords is, “What damage is most likely to occur at my rental property?” Knowing the risks and how to reduce them is key to protecting your investment.

With around 10,000 Homes Nationwide and approximately 5500 homes in Auckland  being affected by the floods earlier in the year, insurance companies were inundated with phone calls for extensive damage to properties.

Many homes were damaged requiring extreme repair, which is why having insurance for your property is paramount to protect your investment. Insurance coverage will differ based on your insurance provider and your personal policy.

Unfortunately, as we have seen over the past couple of years around New Zealand, natural disasters can happen out of nowhere. Our property managers at The Rent Shop are all well-equipped and experienced in dealing with unexpected events.

We were by no means immune to the damage caused by flooding in January 2023 with families being displaced, requiring alternative accommodation.

Having an experienced property manager in these extraordinary situations can save you time. At The Rent Shop, we deal with the insurance company and assist with making claims. We will arrange any repairs or access needed for the insurer, taking this off your plate.

In cases where insurance is needing to be claimed, record keeping is crucial, and inspections are one of the first things your insurance provider will ask for. This is why quarterly routine inspections, in line with your insurance policy, are extremely important. Routine inspections are used as evidence to show the insurance company the most recent condition of the property.  

As a landlord, you must issue an insurance statement with any new tenancy agreements. This statement will acknowledge whether or not the rental property is insured and inform the tenants of any information they need to know – including the excess of any relevant policies. It must be clear that the insurance policy is available for the tenants to view upon request.  

If, at any time, the insurance information changes, the landlord is obligated to inform the tenants within a reasonable timeframe.

For further guidance on insurance in relation to residential tenancies,

In most instances, it’s important for both Landlords and tenants to have insurance coverage. Tenants are responsible for organising their personal contents insurance to protect their belongings and landlords are recommended to seek landlord insurance to protect their rental property.

Looking specifically at property damage caused by a natural disaster or severe weather events – the responsibility falls back onto the Landlord. As a general rule, Landlords are responsible for maintaining the rental property in a reasonable condition – this includes fixing any damage caused by severe weather.

If the rental is damaged by flooding, the landlord is responsible for drying the property if it has water damage and paying for any necessary repairs to the flood damage. This might also include paying the tenants for electricity charges to run a fan, dehumidifier, or heater to dry the property.

It is recommended for both tenants and landlords to carefully review their insurance policies and understand what is covered and what is not covered, to ensure that they are adequately protected against severe weather damage.

Water-related damage

These are typically problems like bursting pipes and leaking hot water cylinders. The most common water damage is hidden gradual water damage (HGWD), such as pipes leaking under the kitchen sink, and blocked sewage pipes.  HGWD is often excluded from standard rental property insurance policies, but some policies offer limited cover through a special extension.  It’s important as a Landlord to check this under your current insurance policy The key to proactively managing this risk is regular property inspections and educating tenants to notify as soon as they see something damp.

Loss of rent

Loss of rent applies when damage occurs and the house can no longer be lived in. The floods in early 2023 displaced many tenants, resulting in loss of rent payments to landlords.  During the floods insurers needed to be practical and work with landlords in situations where the property was partially damaged and still able to be lived in.  

In situations where a tenant can no longer reside at the property due to an event like a fire or flood, the tenant must pay for their own relocation and temporary accommodation. It is not your responsibility as a landlord.  If a tenant has their own contents insurance this will usually cover these displacement costs.   Some policies also cover rent in scenarios where there is no physical damage to the house.  So this includes eviction or tenant abandonment.

Accidental Damage

Calamities Happens – such as storm damage

Accidental damage is damage that can’t be avoided, because sometimes unexpected events happen.  This could be caused by an ‘act of god’ type loss such as a storm causing damage to the roof of the property.  Or it could be a leaking water pipe or an electrical fire. This type of damage is completely outside of the control of the tenant  liability, and as such they have no liability for this damage.  The landlord is responsible for this damage and will usually have insurance to pay the claim.

  • Who is responsible for the cost of the damage?  answer:  the landlord (ie.  their insurer)
  • Who pays the insurance excess?  answer:  the landlord

Accidental Damage by Tenant eg.  spilling a glass of red wine on the carpet

Accidental damage can also be caused by a third party, such as a tenant.  This could come in the form of a tenant tripping and spilling wine on the carpet, or their washing machine flooding.  In both cases these are technically outside of the control of the tenant and there is no liability on the part of the tenant.  So even if the tenant causes the accidental damage, the tenant has NO liability.  The tenant can rely on the landlord’s insurance policy the repair the damage, and the tenant cannot be made to pay the insurance excess (or 4 weeks rent).

  • Who is responsible for the cost of the damage?  answer:  the landlord (ie.  their insurer)
  • Who pays the insurance excess?  answer:  the landlord

Careless Damage by Tenant – eg.  leaving a pot cooking on the stove and going to bed

Where a tenant (or their guest) carelessly causes property damage to the home, they are liable for those damages. This could be where the tenant leaves a pot cooking after going to bed and causes fire damage to the kitchen. While the amendment to the act now makes the tenant liable, the maximum amount the tenant can be held responsible for is the landlord insurance policy excess, or 4 weeks rent (whichever is lesser).  The new Act effectively allows the tenant to share in and receive the benefit of the insurance arranged by the landlord.

  • Who is responsible for the cost of the damage?  answer:  the tenant (but its capped at the lessor of the landlords insurance excess or 4 weeks rents)
  • Who pays the insurance excess?  answer:  the tenant

Intentional damage by Tenant – eg.  smashing holes in the wall

A tenant is not excused from liability when the damage is intentional or where the damage they (or their guest) have caused constitutes an imprisonable offence. In such circumstances the responsibility is on the tenant to notify the landlord of the damage.  The landlord can request that the tenant repair the damage, but if the landlord is properly insured  they will be covered for intentional damage so its best to lodge a claim for the damage, and allow the insurer to pursue the tenant for the cost of repairs.

  • Who is responsible for the cost of the damage?  answer:  the tenant
  • Who pays the insurance excess?  answer:  the landlord (but the insurer will attempt to recover the value of the excess from the tenant along with the costs the incurred to repair the damage)

Accidental vs Careless

As accidental damage means that the landlord pays the excess, and careless damage means that the tenants pays the excess, we expect to see disagreements between landlords and tenants about the cause of the damage. If the landlord and tenant cannot agree whether the tenant is liable for the damage, the landlord can apply to the Tenancy Tribunal for the matter to be resolved. Copies of relevant insurance policies, photos of the damage, and receipts or quotes for repair should be included to support the application.

Is my house insured for fire?

If you have insurance on your house, you most likely have cover for fires. However, just to be sure you should check your policy wording to see if fire damage is  excluded or included. We recommend that you check your house insurance policies to ensure they automatically cover fires up to the replacement sum insured you select for your house. Having fire cover for your home is essential. Fire damage makes up a large amount of house insurance payouts. Even a small fire that does not burn the entire house can mean it is a total loss. Smoke contamination and water damage (from the fire brigade) often means homes can’t be lived in and are a total loss. We recommend you check your coverage in the event of intentional fire damage.

Taking a proactive and sensible approach to managing risks as a landlord is its own kind of insurance. From what we observe, landlords who prioritise choosing the right tenants, conducting thorough tenant checks, carrying out regular property inspections, installing fire extinguishers in kitchens, and keeping up with routine maintenance such as clearing gutters, plumbing and electrical work, have fewer damage issues and don’t add to the above statistics.

Selecting an insurance provider well-versed in landlord risk and that offers tailored policies for rental property owners complements a comprehensive strategy to reduce the risks you face as a landlord.

We appreciate your engagement with our content, and we look forward to continuing to provide you with the highest levels of service and expertise in the Realm of Property Management. Should you require guidance or advice concerning your property management needs, please contact our Business Development Team on

09 555 9100 for a no obligation rental appraisal.

Sharon Bradley
General Manager of Licensees/Training