Landlord is not mandatory anywhere in Australia, so you do not technically need it.
That said, it is a good investment if you rent out a property.
Landlord insurance is specifically built for landlords, as opposed to owners occupiers.
Why consider landlord insurance?
Imagine facing costly repairs after a tenant accidentally starts a kitchen fire or a severe storm wreaks havoc on your property's roof. Regular home insurance may offer some coverage, but it often falls short when it comes to tenant-related risks such as loss of rent, malicious damage, or legal liability arising from accidents on the property. Landlord insurance bridges this gap, providing specialised coverage tailored to the unique needs of rented properties.
What does landlord insurance cover?
Landlord insurance policies vary in scope, but typically offer a multi-layered approach to risk mitigation. Key coverage areas include:
Building and contents insurance: This covers the physical structure of your property, including fixtures and fittings, as well as any owned appliances or furniture provided to tenants. Coverage extends to unforeseen events like fire, storm damage, theft and vandalism.
Loss of rent cover: Should your property become uninhabitable due to an insured event, this coverage compensates you for lost rental income while repairs are underway. A related, but different type of cover, is rent default cover.
Legal liability cover: Protects you from financial liability in the event of legal claims arising from accidents or injuries occurring on the property caused by tenants, their guests, or even third parties.
Additional coverages: Many policies offer additional options like rental default cover, glass breakage, and even accidental damage caused by tenants or their pets.
Finder survey: What extra features matter to Australians when choosing a landlord insurance policy?
Response
None of the above
39.09%
Removal of debris
30%
Flood cover
27.27%
Temporary accommodation cover
27.27%
Preventative programs
20%
High-value items cover
18.18%
Asbestos removal
8.18%
Other
1.82%
Source: Finder survey by Pure Profile of 1113 Australians, December 2023
Is landlord insurance mandatory?
While not legally required, most mortgage lenders strongly recommend landlord insurance coverage as a condition of your loan. Additionally, landlords who manage their properties independently can benefit significantly from the financial security and risk mitigation offered by a tailored insurance policy.
Evaluating Your Needs and Choosing the Right Policy
The decision to acquire landlord insurance should be based on a careful assessment of your specific risks and property vulnerabilities. Factors to consider include:
Property type and location: Risks may differ significantly depending on whether you own a house, apartment, or unit, and its location in relation to potential environmental hazards.
Tenancy types: Short-term rentals can present higher risks than long-term leases.
Tenant selection process: Implementing thorough tenant screening can help mitigate certain risks.
Who Doesn't Need Landlord Insurance (Probably)?
While landlord insurance offers a robust safety net for most situations, there are a few specific scenarios where it might not be a critical necessity. However, it's crucial to weigh the risks and benefits carefully before opting out:
Low-risk property: Owning a single, low-maintenance property in a safe location with a long-term, reliable tenant may present minimal risk. Consider thoroughly screening the tenant and ensuring they have comprehensive renter's insurance before making a decision.
Significant financial reserves: For landlords with substantial financial reserves, self-insuring against potential losses might be an option. However, carefully consider the potential costs of unexpected repairs or legal claims before choosing this path.
Short-term rentals: Platforms like Airbnb often have their own host protection insurance plans that may offer sufficient coverage for short-term stays. However, ensure these plans cover potential losses that go beyond the platform's standard coverage.
Remember, these scenarios should be approached with caution. Any unforeseen event, from tenant-caused damage to a natural disaster, can quickly drain even substantial reserves. Additionally, legal claims can be complex and expensive, even for minor incidents. Consulting with a financial advisor or insurance professional for personalized advice is always recommended before making a decision.
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Frequently asked questions
The cost of landlord insurance will vary depending on the type and size of your property, location, chosen coverage levels, and your claims history. Generally, expect to pay somewhere between 0.1% and 0.3% of your property's insured value in annual premiums. However, it's always best to get quotes from different insurers to find the best value for your budget and needs.
Yes, most landlord insurance policies include coverage for accidental or malicious damage caused by tenants. This can include repairs for broken windows, damaged appliances, or even graffiti removal. Be sure to check your policy details for specific limits and exclusions related to tenant damage.
While not all policies offer it, some landlord insurance includes rent default cover. This can provide you with compensation for lost rental income for a predefined period (usually up to a few months) while you navigate eviction proceedings.
Some policies offer limited coverage for vacant properties, but it's often less comprehensive than when occupied. Be sure to check with your insurer about specific coverage details and any additional requirements for vacant property insurance.
Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146).
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