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Granny Flat Insurance – Comparing Prices from Real Quotes

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You may now be looking at securing your granny flat investment by insuring it. So, the main question is : What is the cost of granny flat insurance?

 

This can be difficult to answer without knowing your exact situation, as prices can differ depending on your location, your level of cover, and much more. However, we went ahead an obtained real quotes from each capital city in Australia and the prices ranged between: $399.73 to $780.

 

Read on to find out why the prices varied so much.

 

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It is worth noting as well: If you already have insurance on your existing property, for example, some agencies may allow you to raise and combine your level of cover on this. However, other agencies may separate your existing property from the secondary dwelling.

 

NOTE: Feel free to scroll through the quotes below and find out more (at the end of this article) about what your insurance should include!

 

Granny Flat Insurance – Sydney, NSW

 

I received a quote from an insurance company, Steadfast, for Building Only cover.

The quote we were given is;

  • Cover – Includes Fire, Storm, Cyclone, Flood, Water Damage, Malicious damage and more.
  • Legal Liability Limit: $20,000,000.
  • Building Sum Insured: $150,000.
  • Building Excess: $1000.

 

Not included was Accidental Damage.

This was for an annual price of $702.04 (or $64.93 / month).

I was also advised that if I had pre-existing property and contents insurance, I could combine both for $136 / month – so, depending on your pre-existing property insurance, you could actually lower the cost of the insurance on your granny flat by doing so.

They also mentioned that premiums may be more expensive, as some postcodes may be classified as a “high-risk area” – a secondary dwelling going onto a bushfire prone site will need separate approval from the Rural Fire Service

 

UPDATE: I recently renewed my insurance for our home + granny flat. I live in Terrigal, NSW. And with NRMA insurance they had no issues combining both dwellings on the same policy. This way we simply increased the cover and add in more bedrooms on the policy. This simply included all the bedrooms of the main house plus the granny flat combined.

 

It was easy to setup and pay for it over the phone 🙂

 

Granny Flat Insurance – Brisbane, QLD

 

I got a quote from the insurance company AAMI, again for Building Only cover.

The quote is below;

  • Cover – Includes Fire, Storm, Cyclone, Flood, Water Damage, Malicious damage and more.
  • Legal Liability Limit: $20,000,000.
  • Building Sum Insured: $150,000.
  • Building Excess: $1000.

 

Accidental Damage was not included.

This was for an annual price of $645.45 per year.

Or, to combine a pre-existing house insurance with the granny flat, it came to a total of $1612.72 per year.

 

Granny Flat Insurance – Perth, WA

 

I got a quote from an insurance company, Guild Insurance, for both Building & Contents cover.

I was given 2 choices, the first being the Home Essential cover, which is an insurance package covering essential, quality items at an economical price.

This is the Home Essential quote;

  • Cover – Includes a set list of common insurance risks, such as Fire, Flood, Storm Damage, and theft.
  • Legal Liability: Included.
  • Building Sum Insured: $150,000.
  • Building Excess: $500.
  • Accidental Damage: Not Included.

 

This was for an annual price of $575.18 ($47.93 / month).

The choice of another policy was the Home Elite – a superior package that includes cover for the same risks but also has higher limits of cover in some areas, and also includes Accidental Damage cover.

This was for an annual premium of $980.97 ($81.75 / month).

This company does not give the option to combine the house and granny flat insurance.

 

Granny Flat Insurance – Melbourne, VIC

 

I got another quote from Guild Insurance for Building & Contents cover.

I was again given 2 choices – the first being Home Essential, a quality insurance package covering vital items at a reasonable price.

The Home Essential quote contained;

  • Cover – Includes a set list of common insurance risks, such as Fire, Flood, Storm Damage, and theft.
  • Legal Liability: Included.
  • Building Sum Insured: $150,000.
  • Building Excess: $500.

 

Not included was Accidental Damage.

This was for an annual price of $580.67 ($48.39 / month).

The other insurance policy I was offered was the Home Elite, which is a superior insurance, including cover for the same risks but also includes Accidental Damage cover and higher limits of cover in some areas.

This was for an annual premium of $981.47 ($81.79 / month).

Again, combining the house and granny flat insurance was unfortunately not an option.

 

Granny Flat Insurance – Canberra, ACT

 

I got a quote from the insurance company NRMA, for Building Only cover.

See below for the quote we were given;

  • Cover – Includes Fire, Storm, Cyclone, Flood, Water Damage, Malicious damage and more.
  • Legal Liability Limit: $10,000,000.
  • Building Sum Insured: $150,000.
  • Building Excess: $1000.

 

Accidental Damage was not covered.

I was advised they calculate your insurance premiums differently – so basically, with NRMA in the ACT, you get one policy and just add up the total number bedrooms you have (for example, if your house has 3 bedrooms, and your secondary dwelling has 2 bedrooms, your quote is for a total of 5 bedrooms) – so they will not insure the granny flat alone, you actually must combine it with your house.

The premium for an average house with 3 bedrooms and 1 bathroom, plus a granny flat with 2 bedrooms and 1 bathroom, was an annual price of $760 per year.

As mentioned they will not insure the granny flat alone, but just to give you a rough idea of the price – when I asked for a price on the same type of house alone (3 bedroom, 1 bathroom), the annual price was $435 per year.

 

Granny Flat Insurance – Adelaide, South Australia

 

I asked for a quote from the insurance company QTrust, for Building Only cover.

This is the quote I received;

  • Cover – Includes Fire, Storm, Cyclone, Flood, Water Damage, Malicious damage and more.
  • Legal Liability Limit: $10,000,000.
  • Building Sum Insured: $150,000.
  • Building Excess: $1000.

 

Not included was Accidental Damage.

The premium was an annual price of $678 per year.

They too separate the house from the granny flat and do not offer combined coverage.

 

Granny Flat Insurance – Hobart, Tasmania

 

I once again received the quote from QTrust, for Building Only cover.

The quote is below;

  • Cover – Includes Fire, Storm, Cyclone, Flood, Water Damage, Malicious damage and more.
  • Legal Liability Limit: $10,000,000.
  • Building Sum Insured: $150,000.
  • Building Excess: $1000.

 

Accidental Damage was not covered.

This was for an annual price of $780 per year.

As mentioned, QFast unfortunately do not offer to combine your house and granny flat under the same policy.

They also mentioned that insurance for granny flats in Tasmania are more expensive, as there is a stamp duty to be paid on insurance, and an extra Fire Service Levy that other states don’t pay.

 

Granny Flat Insurance – Darwin, Northern Territory

 

I was given this quote from the insurance company TIO, for Building Only cover;

  • Cover – Includes Fire, Storm, Cyclone, Flood, Water Damage, Malicious damage and more.
  • Legal Liability Limit: $20,000,000.
  • Building Sum Insured: $150,000.
  • Building Excess: $1100 (they did not offer $1000 as per every other state, I’m assuming as this is a “high-risk” area – more on this shortly).

 

Accidental Damage was not included.

The annual price for this was $399.73 per year.

Or, they offered combining your house insurance and granny flat for $1598.99 per year.

They mentioned that in the Northern Territory, there is a waiting period for natural disasters – you are not able to claim for natural disasters such as cyclones, storms and floods which occurred within 72 hours of your policy beginning.

This is an example of certain postcodes being in a high-risk area for cyclones, storms and floods.

 

Granny Flat Landlord Insurance Options

 

Landlord insurance is an agreement that if you are renting your granny flat (known as a “secondary dwelling), and if it gets damaged, a sum of money will be paid out to you.It can be seen as a type of home insurance that offers a financial safety net to you, in case of unforeseen damages to or the destruction of your secondary dwelling.

 

A typical landlord insurance policy covers the building as well as any permanent fixtures and fittings against unexpected damage or destruction. As the landlord, you also have the option of insuring your contents or belongings that reside inside the building, such as furniture or home appliances.

 

granny flat insurance

Getting the right cover makes all the difference when you need it.

 

This is because, as the landlord, you are not financially responsible for your tenants’ belongings, but you are accountable for your secondary dwelling and your own belongings inside of your secondary dwelling.

 

So you can still choose to cover the value of both your rental property and your belongings that reside there. If you’re renting out your secondary dwelling, you want to make sure that you have the best possible financial protection against unexpected events that may risk the safety of your granny flat and your tenants.

 

So be careful when choosing a landlord’s insurance policy, be sure to choose one that covers all necessary bases for you.

 

After all, you’ve worked hard to achieve that extra source of income from your rental, but there are financial risks involved with renting out an investment property, so it makes sense to secure your investment. You could have the best tenants, in one of the safest suburbs, but problems can still arise.

 

It could be from small accidents like food spillage causing carpet stains, or major incidents like fires or floods – either way, accidental loss and damage can occur. These also involve tenants breaking their lease and moving out before due date, or not paying rent on time and leaving you out of pocket.

 

Features to look for in a landlord policy include that it covers:

 

  • Theft or burglary by tenants, and their guests or other burglars.
  • Malicious damage or vandalism by tenants or their guests.
  • Loss of rent, caused by either breaking of lease or tenant default.
  • Legal costs such as representation fees, related to tenant eviction by court order or a claim for a rental loss.
  • Damage caused by disasters such as fires, storms, water damage and floods.
  • Potentially, any loss of rent you have if your secondary dwelling becomes unliveable after one of your insured events occurs.
  • The excess applied if you make a claim.

 

Other features may want to look for in a landlord insurance policy include:

 

  • Damage caused by a tenants’ pet.
  • Public liability cover for injury to someone visiting your secondary dwelling.
  • Rent loss due to events such as a tenant defaulting on their rental payments due to the death of a sole tenant, or the eviction of a tenant by court order.
  • Re-letting costs after a claim on rental loss.
  • Removal of tenants’ property after a claim on rental loss.
  • Change of locks after a claim on rental loss.
  • Cover for professional tax audit fees.

 

These elements vary from policy to policy, so doing some research, shopping around and reading the terms and conditions and PDS (product disclosure statement) of any policy you are considering, so you know what it does and doesn’t cover, may be a good idea before you make your decision.

 

The cost of landlord insurance does vary between states/territories, and even between postcodes – insurers may base the premium prices on the risks associated with your granny flat’s postcode, such as rental default in the area, the risk that damage may be caused by tenant’s in the area, and the

 

They gather this information based on historical data.

 

Commonly not covered in landlord insurance policies are:

 

  • General maintenance expenses.
  • The loss of rental income due to not having a tenant.
  • General wear and tear.

 

It is worth noting that your landlord insurance policy premium may be tax deductible, as it is an investment expense.

 

In order to choose a landlord insurance policy, it may be worth asking yourself the following questions;

 

  • What level of insurance do you want – building only or home and contents?

 

Building only covers financial losses caused by risks, including physical damages to your property, whereas contents insurance covers the loss, theft or damage of your possessions – so, home and contents insurance policies cover a combination of your secondary dwelling and your possessions inside it.

 

It is worth looking at home and contents insurance if you rent out a furnished property, but keep in mind that building only insurance generally doesn’t cover items like carpets, blinds and fittings that you might still have at the property, so it may be worth considering home and contents insurance policy even if your granny flat isn’t fully furnished.

 

  • Will you let your tenants keep pets at the granny flat?

 

If you allow your tenants to keep pets on your rental property and are concerned about the damage they may cause, you may want to ensure that the policy includes cover against damage caused by pets.

 

Even if you are not so keen on letting your tenants keep pets, please know that the rental laws in some states now actually give tenants the right to keep pets upon request. For example, in Victoria, the landlord may be able to refuse pets, but the tenant can obtain approval from the Victorian Civil and Administrative Tribunal (VCAT).

 

If you are unable to refuse pets at your secondary dwelling, making these small adjustments may help to reduce any potential damage.

 

  • Are there any exact risks (for example a flood) that your granny flat definitely needs to be covered for?

 

Unfortunately, we are in an environment where these things are out of our control. You can check your state government’s flood maps or your local council’s planning maps online to see if your secondary dwelling is in a flood zone.

 

If your granny flat is in a potential flood zone, you may want to ensure that you are sufficiently covered in your policy.

 

Keep in mind that the location of the property is going to affect the premiums – if you are in a flood zone, you may be charged higher insurance premiums.

 

  • Does the policy cover accidental and malicious damage, or just theft?

 

You might have great tenants – but what about their friends, or other guests who visit them? It may be worth including accidental breakages, malicious damage and vandalism in your policy as you never know what might happen.

 

Secondary Dwelling Insurance – What’s Most Important?

 

A good quality secondary dwelling insurance policy should cover a wide range of things that are part of the granny flat, and a range of events or situations that may result from damage to the granny flat.

 

Depending on the level of cover you choose, you will find your policy covers a different range of things.

 

Important things to look for in secondary dwelling insurance include:

 

  • Destruction, loss or damage to your granny flat caused by natural disasters – Such as fires, explosions, storms, floods, earthquakes, tsunamis, landslides and subsidence.

 

  • Destruction, loss or damage to your granny flat caused by an incident at your home – Burglary or housebreaking (or an attempt at either), vandalism, malicious damage or riots.

 

  • Escaped liquid – Such as liquid that escapes from a fixed pipe or something attached to a fixed pipe, fixed gutter, fixed tank or drain; a bath, a sauna, a spa, shower base or shower wall, sink toilet or tiled floor that has drainage holes; a refrigerator, freezer, washing machine or dishwasher; a waterbed, swimming pool, fixed heating or cooling system, water main, fire hydrant or water supply pipe, and the cost of finding where the liquid escaped from and repairing any damage that occurs while looking for the cause.

 

  • The burnout of electrical motors – (Fusion damage) up to a certain age (typically 7 years old), and either the repair, reinstatement or replacement of the burnt-out motor.

 

  • Sudden impact – Such as by an aircraft, spacecraft, satellite or anything dropped from them, or by a vehicle, trailer, watercraft or any object falling from them.

 

  • Animals who don’t live at your secondary dwelling – Such as impact caused by any animal or bird that is not kept at your granny flat, and any destruction, loss or damage caused by an animal (generally except for insects, vermin or rodents) which become accidentally trapped inside your granny flat and do not belong to you or anyone living at the property.

 

  • Accidental breakage – Including items such as windows, and the accidental breakage of the secondary dwelling itself.

 

  • Temporary loss of rent – Up to a reasonable amount, usually 52 weeks, caused by your granny flat being damaged and classified as “unliveable”, the breaking of lease or tenant default.

 

  • Demolition and disposal – Covering any reasonable costs of demolishing, removing and disposing of any building debris when destruction or damage occurs.

 

  • Replacement keys – If a key to an external lock door or external window is stolen, or you have reason to believe the key has been duplicated, any reasonable and necessary costs of replacing the external lock, key or cylinder.

 

  • Removal of contents – If a tenant’s contents need to be removed after they have been evicted, any reasonable costs to remove these contents.

 

If there are contents debris after destruction, loss or damage, reasonable costs of removing this.

 

  • Legal Liability – If a member of the household or guest is injured, as a direct result of a physical injury caused by an accident within your secondary dwelling, legal fees (up to a certain value chosen by you) should be covered.

 

Granny Flat Insurance Cost While Constructing

 

Contract Works (also known as Construction Works, Public & Product Liability) is taken out by builders, tradies or subcontractors in order to cover their responsibilities, and insure themselves against loss or damage of their building project.

 

As such, whilst building a granny flat, it is as wise idea to invest in this form of insurance.

 

I received a quote from HIA Insurance Services;

 

  • Cover – Provides cover against theft, fire, storm damage, malicious damage and more whilst the building is under construction, over a period of 12 months or when the building is completed, whichever is lesser.

 

  • Legal Liability: Provides cover in the event that you are found negligent, where a third-party bodily injury or property damage is sustained, up to a limit of $5 000 000.

 

Please note this policy does not cover sub-contractors – it is up to the owner to ensure that all sub-contractors have their own policy.

 

  • Building Sum Insured: $100 000.

 

  • Building Excess: $1000.

 

This was for the annual price of $1271.60.

 

Granny Flat Building and Construction Insurance

 

If you are looking for the insurances you need when it comes to building a granny flat as an Owner-Builder here is the list:

 

  • Public Liability Insurance (Covers third party injury and property damage)
  • Construction Insurance (Damage or theft while in construction)
  • Workers Compensation (If employing people on-site)
  • Personal Accident / Injury Insurance (to cover yourself personally)
  • Voluntary works insurance (to cover family and friends who help you build)

 

This does seem like an extensive list of insurances. However after chatting with a lawyer, they made a good point.

 

Most Insurance companies make their money because of the claims they don’t pay out

 

And more often than not, their may be clauses in which insurance companies won’t pay out an insurance policy because you failed to obtain other types of insurance as well.

 

That is why it is recommended that you speak with an insurance broker to find the best solution for your granny flat build.

 

Conclusion

 

In order to choose a secondary dwelling insurance policy, you need to carefully calculate the value of your property and decide on what is included in the cover is important to you, and then read the Policy Disclosure Statement (PDS) of the insurer very thoroughly, so you don’t end up being underinsured.

 

Reading the PDS before choosing a policy is important, as terms and conditions of policies vary between each insurer, and as you can see, the prices do range from state to state and depending on which level of cover you choose.

 

It’s also important to check the cooling-off conditions so you know how long you have to change your mind if the insurance doesn’t meet your needs.

 

Sources;

 

 

This advice is general only and may not cover all the thing you need, depending on your individual circumstances. Ask an adviser for advice specific to your situation if you are considering being an owner builder.