Renting out a property? Protect your investment and compare landlord insurance policies today.
When you’ve worked long and hard to purchase an investment property, the last thing you’d want is for your money to be wasted. However, damage caused by fire, theft, storms and even bad tenants can lead to costly repair and leave you significantly out of pocket.
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So, is landlord insurance really worth it?
This type of cover is suitable for people who are renting out a house, unit or flat they own. Every landlord would be well aware that renting a property out to tenants is not without its risks, so it’s important that you take out appropriate protection to guarantee your own peace of mind.
Landlord insurance protects you from the common risks that properties encounter, as well as the risks that arise directly as a result of having tenants. All of these risks can end up being incredibly costly if you don’t have the best* landlord insurance policy for you in place.
What should the best* landlord insurance policies cover?
No two insurance policies are the same. Some landlord insurance cover is designed to be taken out in unison with your home and contents insurance. Other policies are more comprehensive and do not require this. There are some general ground rules to look out for. The best* landlord insurance is subjective to your needs, although the policy you choose should offer adequate coverage for each type of situation.
- accidental glass breakage
- loss or damage caused by earthquakes
- loss or damage caused by fire
- loss or damage caused by lightning
- loss and damage caused by storms, rainwater and run-off
- loss or damage caused by the impact of road vehicles, rail vehicles, watercraft, external aerials, animals, falling trees and aircraft
- liability, including for a claim against you by the tenant, and for property damage and injury claims lodged by a third party
- malicious acts, vandalism and intentional damage to the property
- riot or civil commotion
- theft and burglary
- water and other liquid damage
- loss of rent if the tenant defaults on their payments
- tenant neglect, poor housekeeping or unhygienic living habits
- wear and tear, rust and corrosion
- subsidence or landslide
- extreme temperatures
- vermin or insects
- tree lopping
- tree roots
- the lawful seizure of your rental property
- any act of terrorism
- any act or intentional omission
- mechanical, structural or electrical failure of an item
- business interruption costs
- settling, shrinkage or expansion of buildings
- you breaching the rental agreement
- your failure to maintain your rental property in good condition
- faulty design or workmanship that you knew about
- repairs carried out by the tenant
What's the difference between landlord insurance and building insurance?
Read our full guide on building insurance and still a bit confused? That's okay. There are a few core differences between landlord insurance and building insurance. This following table should help you understand them.
|Explosions (caused by gas leaks)||Explosions (caused by gas leaks)|
|Storm damage: including lightning, earthquakes and flood||Storm damage: including lightning, earthquakes and flood|
|Vehicle collisions with the building||Vehicle collisions with the building|
|Vandalism by tenants and their guests||Vandalism|
|Theft by tenants and their guests||Water damage|
|Legal expenses required to evict a tenant|
|Contents of landlord|
Reading the fine print - what should I watch out for?
It's crucial to check all the terms and conditions of your policy. Read carefully over what is covered and what isn't covered as they vary from policy to policy. There are a few terms in most PDS' that landlords will need to meet in order to make a claim. Ensure you have:
- A formal lease. A formal lease agreement must exist between you and your tenants that specifies the occupation dates and amounts payable.
- Detailed reports. Complete entry and exit reports with supporting photographs will protect you if any damage arises.
- Regularly conducted inspections. Landlords should have a written record of the outcome of each inspection in case the insurers request it.
- Legal expenses. If you lodge a claim for rent default or tenant theft you are able to cover the cost of legal expenses for recovering rental income owed to you.
- Strata title mortgage protection. This is useful for properties that are units. If your insured building is part of a strata title development, has not been adequately insured by the strata and is totally destroyed by an insured event, your policy will cover your remaining mortgage.
- Landlord workers’ compensation. This covers your liability if you employ a person to do work on your rental property and they are injured whilst working for you.
- Pets. Damage caused by animals is a common exclusion in insurance policies. It's best to ensure your tenants do not have pets, or alternatively, actively search for a policy that covers pets.
Read between the lines
Ensure your policy covers you for:
- Malicious damage. Most policies will cover you for malicious damage caused to the property by your tenants and their guests, but you may have to pay an extra premium for this feature.
- Fixtures and fittings. Check exactly what fixtures and fittings are included in your property cover. Most policies will generally offer protection for damage to things like pipes and cables, fixed appliances, sheds, exterior blinds and awnings and in-ground swimming pools.
- Possessions. If you choose a landlord policy that also covers some of the contents of the property, look closely at the fine print to see what is included in your policy. Note the coverage of carpets, blinds, furnishings, and light fittings.
- Tenant default. The best* landlord insurance policies will cover you when tenants default on their rent. This may happen because of a tenant’s financial difficulties, if a tenant is evicted due to a court order or if a tenant dies unexpectedly.
- Theft. Surprisingly, theft by tenants is not always covered. Be sure to read individual policies in detail.
How much does it cost?
Whilst there is no price set in stone, the cost of landlord insurance can be impacted by multiple factors. Some of these include:
- what type of property it is
- where you live
- the value of your building and contents
- the level of security your property has
- if it surrounded by any tall trees
- the age of the insured
- the flood risk of your property
- the construction materials of your rental property and its roof
- the year your rental property was built
One way to calculate how much insurance will cost you is to get quotes from as many different providers as possible.
How does landlord insurance cover me against damage caused by tenants’ pets?
Landlord insurance is not designed to cover damage caused by tenants’ pets. However, you can still find a limited level of damage cover, and liability cover for injuries caused by animals kept on the premises.
Generally you are limited to specific types of damage cover, and insurance for damage caused by pets deceptively kept on the premises in breach of the tenancy agreement.
For the most part, landlord insurance is not designed to protect against damage caused by pets outside of liability cover, which can insure against injuries caused by pets to visitors. Where you do have some form of insurance against damage caused by pets, it’s typically restricted to cover for specific ornamental items that have been knocked over by pets, or a limited amount of cover for damage caused by pets that were kept on the premises without your knowledge, when specifically prohibited under the tenancy agreement.
Here are just some insurers that offer forms of pet insurance:
|Pet damage that can be covered||Pet damage not covered||Get quote|
|Budget Direct||Insured events caused by resident pet, except accidental damage and most impact damage.|
Impact damage caused by resident pet to glass, crystal and ceramic items, except certain items like laptop or phone screens.
|Accidental damage caused by animal pecking, chewing, clawing, biting, urination or defecation.||Get quote|
|Youi||Vet fees for accidental injuries to a household cat or dog, up to $1,000 per year, as an optional extra with contents insurance.|
Damage to household furnishings such as white goods, carpets and blinds, when caused by fire related pet damage, with optional landlord furnishings cover.
|No cover for any damage caused by resident pets, except when fire related.||Get quote|
|Virgin Money||Insured events caused by resident pets, such as a fire inadvertently caused by an animal.Impact damage to crystal, glass and ceramic items, such as vases, caused by pets, with some exceptions such as laptop and phone screens.||No impact damage cover for damage caused by any animal, whether or not a pet, except for the specified crystal, glass and ceramic items.||Get quote|
|Dodo||Impact damage caused by resident pets to glass, crystal and ceramic items, except certain items like laptop or phone screens.||No cover for impact damage caused by resident pets, no cover for any damage caused by animal pecking, chewing, clawing, biting, urination or defecation.||Get quote|
Some other questions to consider:
Is landlord insurance the same as building insurance?
Landlord insurance generally covers events that lead to the loss of rental income, damage, or theft in your property. On the other hand, building insurance protects your against damage to the property’s structure. For more information on building insurance, read our comprehensive guide.
Is landlord insurance compulsory?
There is no legal obligation for landlord to take out insurance. However, some mortgage lenders may require you to take out insurance before you rent your investment.
Is landlord insurance tax deductible?
In most circumstances, landlord insurance is tax deductible.
Can I take out insurance whenever I like?
If you try and get insurance only when you encounter a problem, you're likely to get rejected. For this reason, it's best to take out landlord insurance before your tenant moves in.
Does landlord insurance cover legal costs?
There are some policies that won't cover legal costs if you end up in court against a tenant. Be sure to read your PDS in detail.
Am I covered for extended vacancy?
Some policies won't pay you if you're in between tenants. If there's a chance that you will have an extended vacancy in your property it's best to look for insurance that covers this. Find a policy that covers you regardless of whether a tenant is occupying the property.
What happens if the landlord moves back into the property?
If a landlord moves back into the proprety, the landlord insurance cover is no longer valid. The landlord should inform the insurer as soon as possible.
* The offers compared on this page are chosen from a range of products finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your personal financial circumstances when comparing products.