From partially to fully-furnished rental properties – does insurance have investors covered?

The way an investment property is leased – unfurnished, partially-furnished or fully-furnished – makes a difference to the kind of insurance needed. Why? Read on to find out… 

A question many property investors ask is whether they should rent their property out furnished or unfurnished. There’s no right or wrong answer, it comes down to who the target market is, the location, preferred use of the property, and demand.  

With this in mind, there are several options for furnishing rental properties: 

• Fully-furnished and equipped – where all the household items needed for daily living, from furniture and appliances to kitchenware and linens, are provided – the tenant can move in with just their personal belongings. This is most common for properties leased short-term or as holiday rentals, including via Airbnb. 

• Fully-furnished – the rental has all the furniture and whitegoods a tenant needs (appliances like TVs may or may not be included). The property provides the necessary furnishings like a sofa, bed, and major appliances, but the tenant will need to bring additional items like kitchenware and linens. 

• Partially-furnished – the rental has some furniture such as beds, sofas, tables and chairs. 

• Whitegoods only – some or all whitegoods are provided such as washing machine, dryer, fridge, freezer, stove, microwave oven, air-conditioner or dishwasher. 

• Unfurnished – no furniture or appliances are provided. The tenant will need to bring everything they need for daily living. 

While approximately 90 per cent of properties within the rental market are leased unfurnished, there are numerous reasons investors choose to lease an investment property furnished – market expectations, it was purchased as a furnished apartment, perhaps the owners are renting out their home temporarily while living elsewhere (e.g. during a secondment for work), it demands higher rent, and so on.  

Contents are contents... Or are they? 

Regardless of the reason, if you are offering a rental furnished, extra cover may be needed. You may be wondering why. The policy says it includes contents. And contents are contents, aren’t they? Not when it comes to insurance they aren’t. 

The contents policy you would traditionally take out for a personal residence is usually bundled as ‘home and contents’, and it will likely define contents differently to how it is defined in a landlord insurance policy. An owner occupied home and contents policy likely includes all personal possessions – from whitegoods and furniture, down to your clothes and toothbrush. This isn’t the case with landlord contents cover. Although it varies between insurers, when landlord insurance providers talk about contents, they are usually referring to fixed/permanent/unmoveable items only. That means fittings and fixtures like: 

• curtains, blinds, drapes and other window coverings;  

• carpets and floating floor boards; 

• light fittings.  

For properties in strata complexes, contents also refers to internal paintwork, wallpaper and any fixture or structure improvement that the body corporate is not required to insure. At EBM RentCover, contents also include those items owned by the landlord which are stored at the premises but are not for use by the tenants and must be secured and inaccessible to the tenants (e.g. stored in a locked shed). 

Insuring fully-furnished rentals 

When arranging an insurance policy for an investment property, it is important to select cover that suits how the property will be leased, including in terms of furnishings.  

Landlord contents cover does not usually include furniture or non-fixed appliances such as sofas or TVs. So, if a rental is furnished, additional contents cover is needed. This is known as insurance for non-fixed items. 

Ensure that an inventory of all furniture and appliances included for the tenant’s use is taken – these items should also be listed on the property inventory/condition report. TOP TIP: A contents sum insured should be based on the current cost to replace these items (new for old). When it comes to contents owned by tenants, these are not covered. Tenants need their own renter’s contents insurance to protect their personal possessions. 

What about Airbnb? If a property is rented through the short-stay accommodation market and everything a guest needs for their stay is provided, you need an insurance policy that covers those household goods in addition to protecting fittings and fixtures and non-fixed items like furniture and appliances. An EBM RentCover ShortTerm policy may be suitable. 

Protecting assets 

Should disaster strike a rental (fire, flood, storm, theft, tenant damage), no one wants to run the risk of being caught short financially. Be sure to consider a policy that covers the contents items included for the tenant’s domestic use – whether it’s a fully-furnished property with furniture and appliances or a holiday home with all the bells and whistles. 

Got questions? Please get in touch with a member of our Expert Care team – 1800 661 662.