Landlord insurance can protect you if your tenants go rogue, don't pay their rent, or if something happens to your property. It just makes sense. Compare landlord insurance policies below and learn what to look for in finding the best cover for you.
We analysed 8 insurers and found a difference of $1,660 a year between the least and most expensive landlord insurance policy for the exact same home. The moral of the story? Get a bunch of quotes before you sign on that dotted line.
Compare landlord insurance special offers for April 2020
Landlord insurance offers a broad range of protection across three critical areas: loss of rental income, damage to building and damage to contents.
Loss of rental income
Landlord insurance protects you against the loss of rental income due to the following events and circumstances:
- Absconding tenant. This refers to a tenant moving out without giving proper notice, or if they move out at the end of the lease and leave rent unpaid.
- Defaulting tenant. You’ll be covered if a tenant fails to pay their rent and is either issued with a termination notice, or has their lease terminated by court or tribunal order.
- Tenant failing to vacate. If you suffer loss of rent due to a tenant who refuses to pay rent and vacate your property following a court order, landlord insurance provides financial protection.
- Death of a tenant. Covers you for loss of rent if your tenant should pass away.
- Tenant hardship. If a court decides that, due to financial hardship, your tenant will be released from their lease obligations, your policy will cover you.
- Unlivable property. This benefit ensures that you are covered for loss of rent if your property isn’t fit to be leased due to malicious damage to the building by a tenant, or damage to your contents caused by an insured event.
- Unable to access property. Your policy can provide cover if a tenant is unable to access the property due to damage to other properties nearby.
Damage to building
If there is loss or damage to your building caused by tenants, their family members or guests they invite onto the property, landlord insurance will offset the cost of repair or replacement. Cover is included for the following:
- Insured events. Just like a regular home insurance policy, landlord insurance provides cover against events such as fire, flood, storm and water damage. It includes demolition, removal of debris and rebuilding costs.
- Accidental loss or damage. Your building is covered against sudden and unexpected loss or damage.
- Intentional damage. If the building is wilfully damaged without your consent, your policy offers financial protection.
- Malicious damage. This covers damage to the property that is motivated by malice.
- Theft. You’re covered for loss suffered due to theft, as well as any damage to your building that occurs as a result of theft.
- Pet damage. Many landlord insurance policies cover damage to the property caused by a domestic pet owned by the tenant and listed on the lease.
- Scorching. If cigarettes, irons or pots and pans spoil the carpet or bench tops in your property, you will be covered for the damage.
What's classified as a building?
A building is defined as a property that you own at the insured address, which is used primarily for residential purposes. The definition of a building includes:
- Fixtures and fittings, including built-in air conditioning units, plumbed-in dishwashers, cooktops, doors, walls and windows
- Structural improvements, including paths, driveways, fencing, retaining walls and in-ground swimming pools
- Awnings, pergolas, TV antennas, solar panels and letterboxes
- Fixed floor coverings such as linoleum and tiles, but not carpets
- Fixed light fittings
- Underground services located on your property, including sewerage, plumbing and electrical services
Landlord insurance also provides protection for the contents you own, or for which you are legally responsible, in your investment property, including the following:
- Accidental loss or damage. You’re covered for sudden or unexpected loss or damage to contents.
- Intentional and malicious damage. Protection for damage caused by a tenant or by any other unknown person.
- Insured events. Incidents such as flood, storm and rainwater, fire, explosion, impact, escape of liquid, earthquake, lightning and glass breakage are all covered by this policy.
- Theft. This benefit insures against theft or attempted theft by a tenant, members of the tenant’s family, the tenant’s invited guests or an unknown person.
What contents are covered?
The contents covered under a landlord insurance policy are those items owned by you at the property, or for which you are legally responsible. This includes:
- Electrical appliances
- Portable household items
- Curtains and blinds
- Manchester and linen
- Carpets and rugs
- Above-ground pools
- If you own a property in a strata titled building, contents can also refer to temporary wall, floor and ceiling covers
What additional benefits are available?
As well as the items listed above, landlord insurance policies offer a range of additional benefits to suit a landlord's unique needs. These include the following:
- Legal expenses. If the insurer has accepted a claim for loss of rent, your policy can cover the legal expenses you incur when attempting to reduce your loss, or if you have to organise a legal defence.
- Representation expenses. If your property manager represents you in court or at a tribunal hearing, your insurance covers their representation fee.
- Sheriff/bailiff fees. Covers the cost of engaging a bailiff or sheriff to evict a tenant.
- Tax audit costs. If the ATO or another government authority conducts an audit of your financial affairs, landlord insurance can cover the professional fees you incur as a result.
- Legal liability cover. You’re covered for legal liability if you’re at fault when a tenant or another party dies or suffers a bodily injury at your property, or when someone else’s property is damaged.
- Replacement of locks. If a tenant is evicted by court order and you need to change the locks, landlord insurance can cover this cost.
- Removal of tenant’s possessions. If a tenancy has ended and you’ve made an insurance claim for loss of rent, your policy may cover the cost of removing the tenant’s possessions from the property.
How much does landlord insurance cost?
There is no blanket answer to the question of how much you can expect to pay for cover. But we did get quotes for 8 Australian landlord insurance brands and found that the cost of landlord insurance can differ by hundreds a year for the exact same property.
What impacts the price you pay for insurance?
Landlord insurance costs are influenced by a number of factors, including:
- The value of your building and contents. Ultimately, the more you insure your building and contents for, the higher your premiums will be.
- The type of property. Freestanding homes will usually cost more to insure than apartments in apartment buildings since they're generally exposed to more risks.
- The building materials. Building made with sturdier materials like concrete will be cheaper to insure since they're less likely to be damaged.
- Where the property is located. Homes in riskier areas like high-crime neighborhoods will cost more to insure that similar homes elsewhere since they are more exposed to certain types of risks.
- The landscape. Other unique factors about your property will factor into your risk profile. For example if you're surrounded by tall trees, you might be at risk of impact damage.
- How secure your property is. Having strong security features like deadbolted doors and an alarm system can help bring your costs down since they will prevent certain types of claims.
- Your claims history. If you've previously made multiple claims on your landlord insurance policy, you can expect an increase in the cost of cover in the future.
- Any additional options you choose. If you choose a policy with extra features like tax audit cover and cover for your legal fees, you can usually expect to pay a little more.
The easiest way to estimate your costs is to compare landlord insurance quotes from a few different insurers.
Why do I need landlord insurance?
- It protects you against risks faced by landlords. As a landlord, you’re exposed to a range of unique risks that don’t affect ordinary homeowners. The best landlord insurance provides the financial protection you need to look after your investment property.
- It provides peace of mind. In many cases, the security bond won’t be enough to cover you for tenant-related losses. Landlord insurance is designed to guarantee that you won’t be left out of pocket when something goes wrong with your property.
- Your premiums are tax deductible. Landlord insurance is classed as an investment expense, which means that the premiums you pay towards your policy can be claimed as tax deductions.
- Cover is available for short-term rentals. Landlord insurance doesn’t just cover long-term tenancies; there are also policies available to cover short-term rental arrangements, such as renting out your property through websites like Airbnb or Stayz.
What should a body corporate cover?
If your investment property is in a strata-titled building, as it might be if it’s an apartment or a unit, it’s important to be aware of what situations are covered by your landlord insurance, and what falls under the residential strata insurance policy.
Also known as body corporate cover, residential strata insurance covers the common property managed by strata or the body corporate. This means it provides cover for loss or damage to the following:
- The building and any of its structural improvements
- Fixtures which form part of the building
- Common areas
- Fences and gates
- Fixed swimming pools
- Playing surfaces, such as tennis courts
- Above-ground and underground services
- Lawns, trees, plants and gardens
It also covers contents located in a common area, such as:
- Furniture and furnishings
- Blinds and curtains
- Light fittings
- Portable appliances
- Temporary wall, floor and ceiling coverings
However, the exact list of items and areas covered varies between insurers, so check the policy's product disclosure statement (PDS) for full details of the cover provided.
What exclusions should I be aware?
When you compare the best landlord insurance policies, make sure to take a close look at the list of general exclusions. These are situations and events which the insurer will not cover, such as:
- Any intentional act committed by you, your family or anyone acting with your consent
- Water entering the building through an opening made to renovate or extend the property
- Poor housekeeping by your tenants, such as unhygienic or untidy living habits
- Rust, wear and tear, mould or mildew
- The lawful seizure of your property
- Loss or damage caused by insects or vermin
- Repairs carried out by the tenant with your consent
- If you breach the lease agreement
- Loss or damage that arises due to keys being provided for property inspections
- The tenant using the property for trade, manufacturing or childcare with your knowledge or consent
- The lawful seizure of the property
- If the property is vacant, is not advertised for sale and no effort is being made to either prepare the property for a new tenant or find a new tenant
Read the PDS closely for a full list of general exclusions.
How to choose the best landlord insurance policy
Landlord insurance may seem complex and confusing, but keeping a few simple tips in mind can make it a whole lot easier to select the right cover:
- Check that pet damage is included. Not all policies cover damage caused by pets owned by tenants or their guests. Check the fine print to find out whether or not this is the case.
- Cover while untenanted. It’s also a good idea to check whether you will still be covered if the property is left untenanted for an extended period. You may have to satisfy specific conditions to ensure that cover remains in place, such as actively seeking a replacement tenant.
- Building-only versus combined cover. If you’re renting out a fully furnished property, contents insurance is a must. However, if your property is unfurnished, you may decide you don’t need it. Just remember that carpets, curtains, internal blinds and a range of other items are only covered by contents insurance, so you may still be better off with a policy that provides combined building and contents cover.
- Shop around. Compare several landlord insurance policies to see how they stack up against each other. Obtain quotes for each suitable policy so you can select the best one available.
Do policies 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 that are 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. Any cover for damage caused by pets is typically restricted to specific ornamental items that have been knocked over by pets. Or a policy might include a limited amount for damage caused by pets that were kept on the premises without your knowledge, when specifically prohibited under the tenancy agreement.
Top landlord insurance tips
Remember these simple rules to ensure that you get the most from your landlord insurance policy:
- Get a signed agreement. Many insurers will not provide cover if you do not have an official tenancy agreement in place that you and the tenant have both signed. Make sure you have a written agreement before a tenant moves in.
- Buy cover before your tenant moves in. Make sure you purchase cover before your tenant actually moves into your property. If they have already moved in and fall behind on rental payments before you buy a policy, your insurer probably won't provide any cover.
- Conduct regular inspections. Regular property inspections are essential not only to minimise the risk of tenants damaging your property, but to also back up any claim you make on your policy.
- Keep detailed reports. Completed entry and exit reports with supporting photographs will protect you if any damage arises.
- Check exactly what's covered. If you choose a landlord policy that also covers some of the contents of the property, look closely at the fine print to see exactly what is included. For example, check what fixtures and fittings are listed. Most policies offer protection for damage to items such as pipes and cables, fixed appliances, sheds, exterior blinds and awnings, and in-ground swimming pools.
Who offers landlord insurance in Australia
Here are some of the insurers who offer landlord insurance in Australia:
Ask an Expert