Are all Landlord insurance policies created equal? No!
Occupancy type is a major factor in the risk matrix of home insurers. One of the fundamental determinants in the cost of an insurance policy is:
What is the occupancy type?
In residential property terms, this could be:
Owner occupied – may be deemed a lower risk factor but higher likelihood of accidental damage claims
Holiday home – more likely to be unoccupied for periods of time and therefore may be rated for higher likelihood of burglary and water damage claims
Let to long term tenants – Major risks: Tenant damage, rent default, public liability
Let to short stay tenants - Major risks: Tenant damage, public liability
Let’s examine the last 2 and spot the major differences.
Long term tenant insurance
Definition: Stays of 3 - 12 months or more, and subject to residential tenancy lease
How is it different to a home owner/occupier's policy? Apart from the usual Building/Contents/Public Liability covers, a Landlord policy usually features:
Rent Default – tenant absconds, owing rent
Loss of Rent – property becomes uninhabitable due to damage, and tenancy needs to be vacated or the property is unable to be let while repairs are being carried out
Is it the same for short stay properties? Not quite.
Short Stay is generally defined as stays of less than 3 months, where there is no lease in place. Bookings are normally taken online with no other written agreements. Some insurers will only cover bookings taken on specific sites (ie: Airbnb) while others are not prescriptive about the origin of the booking.
If using a short stay property agent or manager, property owners need to be aware of how their properties are being listed. Some list on Airbnb exclusively, and others use channel managers to list on a multitude of sites such as Expedia, Booking.com, HomeAway, Agoda etc. Make sure your insurance doesn’t exclude bookings from sites that you or your agent use.
Short stay Landlord policies do not provide cover for Rent Default, as it is not a long term tenancy with a lease. Payment for the stay is typically taken upfront so there is no rent owed if the tenant absconds or cuts their stay short.
For short stay properties, Loss of Rent may be covered under a policy, or it may be an optional extra that comes with payment of extra premium. Conditions of claim settlement vary from one insurer/product to another: Some will only cover the cost of cancelling confirmed bookings in the event that the property becomes uninhabitable due to damage, others will cover the cost of the loss of income that comes with the property being unable to be let whether you have firm bookings or not. You need to check with your broker to confirm these important details.
What if my property usage changes from short stay to long term let?
You need to let your broker know. Some policies can be endorsed to change the occupancy type (there may be extra charges involved, depending on the insurer, the product and the risk rating that the insurer has applied). Other policies may be specifically for one type of occupancy or the other, so you may need a new policy. Your broker should know and can help you find you the right cover.
What if I am moving into a property that I was previously letting out?
If you previously had a Landlord policy, you may be able to keep that in place and change the occupancy to Owner Occupied, but Ceneta recommend that you get a new Domestic Home policy that gives you the full range of covers and protections to fill the gap in cover. Again, your broker can advise you of the cover that is best for your unique situation.
Can I cancel my insurance policy to move to the correct cover?
Yes, you can always cancel a policy and get a refund for the balance of days remaining, but be aware that commission & fees are usually not refundable. Always check the FSG of your broker or insurer for full details on how policy cancellations are handled and potential fees & charges.
The information provided is general advice only and does not take account of your personal circumstances or needs. You should consider the PDS prior to making the decision to purchase this product. Please refer to our financial services guide which contains details of our services and how we are remunerated.
Need to know more? Contact Ceneta Insurance Services
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