Diana Clement: Landlords need more cover

Specialist landlord policies cover damage caused by tenants, theft, and loss of rent. Photo / Getty

If you're looking to buy an investment property, it's important to factor in the insurance when doing your numbers on the purchase. Insurance on a rental property is a different proposition to your own home.

Tenants can and do destroy homes in a way your family is unlikely to. They may manufacture P in it, or party hard. Some tenants deliberately and maliciously destroy their rental properties, do a runner without paying rent, or die on the property.

Airbnb owners also need to make sure they have the right insurance in place and have declared their activities to the insurer.

Many standard house insurance policies include some sort of cover for landlords. For example, State's Home Comprehensive insurance policy includes some cover for methamphetamine damage.

Standard household insurance policies usually offer some cover for loss of rent as well. But don't assume that all policies do.

Specialist landlord policies usually cover all the standard things in a homeowner's policy, but go a step further and cover rental-specific risks such as intentional damage by tenants, landlord furnishings, theft, and loss of rent if tenants leave without notice.

Sometimes, these risks aren't included as standard, but can be added. In a landlord policy, the cover for methamphetamine contamination is often higher than standard home policies.

AA Insurance's Landlord Insurance policy, for example, covers up to $30,000 for contamination and repair as a result of tenants using or manufacturing illegal drugs and up to $20,000 for malicious damage or theft.

Companies such as Vero, Tower, State and AMI, have specialist policies aimed specifically at rental property owners and other smaller players, such as Initio, specialise in this type of insurance.

Just to confuse matters, there is another range of landlord policies that don't cover the house for the standard risks such as fire and earthquake, but offer another layer of cover for the risks faced just by landlords.

One such policy offered by Rentsure covers up to six weeks loss of rent following the death of a tenant, as well as loss of rents for non-payment of rent, legal liability as a landlord and a number of other risks.

Likewise REAL Landlord Rental Property Policy covers many of those landlord specific risks as well as cover for hidden gradual damage, which tenants often don't report to their landlords until it's too late.

Because short term Airbnb lets don't come under the Residential Tenancies Act, they may not be eligible for the policies above. REAL, for example, has a specific exclusion for holiday homes. Airbnb owners with standalone dwellings need to be sure they're covered by their policies.

Likewise, people letting rooms in their houses need to inform their insurance company because the risks are higher than if it was only a family living in the home.

Reading and comparing the policies can be confusing for first-time landlords and it is a good idea to get advice from an independent adviser/broker who specialises in landlord insurance.