Nov2014_Understanding Property Insurance

Part 2 Home Insurance

Following on from our previous article on Home and Contents insurance, we are now to review the Rental Insurance.

Rental Insurance differs from your standard home and contents policy in a number of regards.

Firstly, where your home policy covers your home and contents as two separate risks, a rental insurance policy will not cover the contents of the home as these are the tenants own contents. What a rental policy will cover is certain contents fixtures and fittings these are usually curtains carpets, light fittings and blinds. There may also be limitations of cover for these items such as devaluation of old carpets over 8-10 years old. Also maximum cover may be limited to a set percentage of the total building sum insured. You will need to check the policy disclosure document to make sure what these limitations are.

The second difference is cover in most policies is extended to loss of rent due to an insurable event; but not from rent default. What one has to be aware of is the basic Rental insurance will not cover damage caused from tenants or rent default. To get cover for these risks you would need to either get additional cover if available from mainstream insurers or approach specialised insurers that offer the cover required.

Insurance cover misconceptions:

There are a few misconceptions that property owners have with regards how far their insurance policy covers damage to their homes.

In my previous article I mentioned the policy will not cover keeping a uniform or matching appearance. To give an example if one tile has broken to a living area floor from an insurable event, your insurance will cover the replacement of the single tile to match as close as possible to the existing. If an absolute match cannot be found they will generally not replace all the tiles to the floor to match.

Another misconception is damage from burst pipes.

The policy covers the damage caused from the burst pipe, not the fixing of the pipe that burst, this is the property owner’s responsibility. Most polices will cover reasonable costs in locating a leak  up to a maximum percentage of the total sum insured or set sum allowance. 

Tenants:

Tenants need to ensure they have adequate contents insurance; should you cause damage to the rental home for example, causing damage from fire because you left a sauce pan full of oil on the stove, you may become liable to the landlords insurer for the costs of repair. You need to ensure your legal liability cover will cover you for claims under the main building events if you have caused the damage. 

So in conclusion the number one rule is when taking out insurance always read the policy disclosure statement to ensure you have the cover you require.

By Craig Corner 

Fox & Co Real Estate.