Renters’ insurance - A guide

What is renters’ insurance?

In NZ, renters’ insurance is really just a marketing term for contents insurance. You will get a contents insurance policy and so will be covered everything a contents insurance policy does.

Discover how to get the best deal with our guide to contents insurance.

However, it’s worth looking at contents insurance as it applies specifically to renters: what it covers, what it doesn’t, and how to get the best cover.

What does renters’ insurance cover?

Renters’ insurance will protect your personal possessions, like your furniture, clothes, electronic devices, cycle, and so on. If something you own is lost, damaged or stolen, you can make a claim to your insurer and they will either repair or replace it.

Here’s a summary of other things good renters’ insurance will cover:

• Your possessions when you’re moving house.
• Home office equipment.
• Your contents when they temporarily stored or relocated elsewhere.
• Temporary accommodation if your home becomes uninhabitable due to damage.
• Credit and debit card fraud (if your bank won’t cover it).

Importantly, with renters’ insurance you will also be covered for any damage you cause to the property of other people. This can be especially helpful for renters who are living in someone else’s property and possibly sharing that space with others.

Rental property damage

Tenants are financially responsible for damage to property they cause to their property, even accidentally.

The Residential Tenancies Amendment Act 2019 states that if a tenant damages their rental property as a result of careless behaviour, they must cover the cost.

This liability is capped at a maximum of either four weeks’ rent or the landlord’s insurance excess, whichever is lower. However, if you damaged a neighbouring property (in a fire that spread, for example) you would be financially responsible for the full cost of the damage to that property.

As renters’ insurance includes legal liability cover, it would cover these costs on your behalf.

What does renters’ insurance not cover?

While renters’ insurance covers more than some expect, it doesn’t cover everything.

The things renters’ insurance generally won’t cover include:

• Your flatmate’s stuff: You may share the same space, but you can’t share the same insurance policy.
• Travel outside of New Zealand: Your renters’ insurance will cover you on a holiday or road trip anywhere in New Zealand, but as soon as you step outside the country you’ll need travel insurance.
• Theft or deliberate damage caused by a flatmate: You won’t be covered if someone you live with steals or intentionally breaks something of yours.
• Wear and tear: Renters’ insurance won’t cover things like the kind of damage that occurs naturally to your possessions through age and use.
• Pet damage: Most policies won’t cover damage caused by a domestic animal.

Do you need it?

Insurance is not a legal requirement when you’re renting so whether you feel it’s worthwhile is a personal choice

Even if you think you don’t have much to insure, the legal liability protection that renters’ contents insurance provides means it’s still worth considering. Some renters may feel they could replace their possessions if they were lost or damaged, but the financial repercussions of accidentally damaging your rental property, or those joining it, can be much more substantial.

If you’re a student and you’re staying in a halls of residence, you may be covered by your parents’ contents insurance. If you are a student, check with your parents first.

What to consider when looking for renters’ insurance

The best renters’ insurance provides the cover you need at the best price. Most of us have different needs and circumstances so there is no one policy that is right for everyone.

These are the things that you should consider when looking for renters’ contents insurance.

Choosing the right sum insured

When you take our renters’ insurance, you will have to select a maximum value to protect your contents for. This number is called your sum insured and it’s pretty important.

It’s fairly common for renters to underinsure their things (choose a sum insured that is lower than the total value of their possessions). Some do this because it can be hard to judge the value of everything you have in your apartment. Others might do this because choosing a lower sum insured means paying lower premiums.

However, you may be surprised by how little increasing or decreasing your sum insured value affects the price of your premiums.

When getting quotes, enter a sum insured that you are confident would cover the full replacement of all your things. If you then want to see how much you could save by lowering that value, bear in mind that it may mean you end up underinsured.

New for old vs market value

Contents policies come in two flavours: new for old (or ‘replacement cover’), or market value.

With a new for old policy, your lost, stolen or damaged items will be replaced with brand new products. This means that if the laptop that you’ve had for 5 years smashes to pieces, you’ll get a new, up-to-date equivalent model.

Market value covers your things up to their value at the time of the loss. So in the laptop example above, a claim on a market-value policy will result in a laptop of the same age and specifications, or a cash equivalent.

New for old cover is superior, but it will result in higher premiums when compared to market value cover. Compare quotes for policies of both types and see if the potential value of new for old is worth it for you.

The level of cover

Insurance policies may be broadly similar in what they cover, but important differences can be found in the level of cover they offer for each kind of loss.

Many insurers offer 2 or 3 contents policies, ranging from more to less comprehensive. A basic policy may cover a loss to a watch or item of jewellery up to $500, while a more premium policy might cover it up to $3,000.

Policies at higher tiers will also cover things that a less expensive policy may not. This could be a replacement feature for bikes, or cover for home office equipment.

It pays to spend a little time reviewing the different levels of cover and deciding which one is right for you. You might discover that a basic policy has all the cover you need, while saving you money. Alternatively, you could find out that for a little extra on your premiums you could protect things that are really important to you.