Industry Tips on Insuring Granny Flats
Using a granny flat as a rental may generate a good income for owners and help ease the current rental crisis. But, just like any other investment, it is wise to make sure you protect it properly with the right landlord insurance.
Landlord insurance financially protects landlords against the unique risks that renting a property presents.
When you have a second dwelling on the one property, securing appropriate landlord insurance isn’t as simple as it seems
The following scenarios will assist you to make a safe choice when insuring your granny flat.
Scenario 1: granny flat is located on the same site as the owner’s primary residence
As the granny flat is built at the same address as the residence, the structure is considered part of the main building, such as a fence or shed. This means that building insurance for both the main residence and the granny flat need to be taken out with the one insurer.
In many cases, a standard home and contents policy may not be suitable if the granny flat is being used as a rental. Typical home and contents policies have exclusions on cover when a property is being used for income-generating purposes. Even if the insurer will cover the property if it is being used as a rental, it is usually only through a specialist landlord insurance policy that the risks associated with leasing are adequately covered.
TIP: You need to makes sure that your insurer would agree given part of the property is being used as a rental.
Scenario 2 – granny flat is located on the same site as an investment property
If both properties are being used for the same type of tenancy (ie, rental accommodation), a single policy with building cover may be suitable. This cover may include financial protection for the building structures against a range of insured events plus cover for loss or damage to contents, legal liability and loss of rent provisions.
TIP: Make sure your insurer notes both residences on the insurance policy.
Scenario 3 – granny flat is on a separate title
If the property has been subdivided and the granny flat is on a separate title (it has its own address), then a policy with building cover may be suitable. The general rule is that each address requires its own insurance policy.
Cover
When selecting an insurance policy, consider the following features: loss of rent, tenant damage, legal liability, cover for insured events like fire, storm and flood and pet damage. Typically, a standard home and contents policy does not offer cover for tenant-related risks. Instead, consider looking to a specialist landlord insurance provider like EBM, Terri Scheer, MGI and SGUA so you can cover all the risks you might face as an investment owner.