Landlord building insurance
Landlord building insurance could be the difference between losing your home and keeping it, making it perhaps the most important feature of landlord insurance.
When you're shopping for insurance as a landlord, you'll find that landlord insurance brands will almost always offer to protect you against three main aspects of your investment: damage to your building, damage to any belongings you keep in it and tenant related issues, like themnot paying their rent or damaging your property.
That means landlord building insurance is just one-third of a larger product called landlord insurance. Given the cost of rebuilding these days, it's most likely the most important third. Some insurers will automatically include it in their landlord insurance policy, and for others you'll have to select this cover type as part of the quote process. You're not obligated to get all three cover types, and can just get building insurance if that's your main concern.
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What's the difference between building insurance and landlord insurance?
Building insurance is just one of three main components of landlord insurance. It protects the physical structure plus the fixtures inside from a range of damages like:
Fixtures refers to any belongings that are permanently secured or bolted into the walls or floor. Examples include built-in air conditioning units and dishwashers.
However, building insurance isn't the only type of protection landlord insurance provides.
Another is landlord contents insurance, which covers the fittings and other personal belongings you keep inside the property. Fittings include carpets (except in NSW where they are legally considered fixtures), curtains, free-standing appliances, paintings mirrors and furniture. Landlord contents insurance covers you from the same types of events as building insurance does: mother nature, impacts, leaking water, fires and more - but in relation to your stuff, not the building.
Rental income insurance is the third, and it covers you for lost rent, like when a tenant defaults on rent or your property is damaged and it's unsafe to rent out. It also covers any intentional damage your tenant causes since building and contents insurance by themselves exclude that from cover.
This table will help you understand how landlord building insurance fits into the overall mix:
|Landlord building insurance||Landlord contents Insurance||Rental income insurance|
|Damage to the building and fixtures due to weather, impacts, leaks, vandalism, theft and riots|
|Damage to your belongings and fittings due to weather, impacts, leaks, vandalism, theft and riots.|
|Purposeful damage to the building or fixtures by the tenant|
|Purposeful damage to your belongings or fittings by the tenant|
|Legal fees related to landlord/tenant disputes|
|Loss of rent when the tenant defaults, leaves without paying or is released from paying by a court|
|Loss of rent when the building is damaged due to an insured event|
Do landlords need building insurance?
Building insurance isn't compulsory, but if you own the building you're making a huge gamble if you don't have it insured.
If you lose your house to fire, it can cost you anywhere from $160,000 - $195,000 to rebuild a 3-bedroom house or $185,000 - $205,000 to rebuild a 4-bedroom house. And that doesn't include cleaning up the debris from the old house or paying for temporary accommodation.
If you own a whole apartment building, you can imagine how high your building costs could be.
Does landlord insurance cover building insurance?
It can, depending on what insurer you're looking at. When you take out landlord insurance, you have the option of also being able to cover your building, as well as your contents. A typical landlord insurance policy will cover you for things like loss of rent and damage by your tenants, but a building insurance policy will cover you for things like natural disasters.
If you're a landlord and decide that you don't want to get covered for landlord insurance, you can still get a building only insurance policy - you just probably won't be covered for any events that are the result of your tenants (like them damaging your property).
What if I'm renting out an apartment?
If your rental property is a unit or an apartment in a strata-controlled building, your strata will be in charge of insuring the building and you won't need your own building cover.
However, there are some aspects of landlord building insurance that your strata won't cover or will cover but not as well as your own policy would. This includes:
- Your fixtures like bathroom suites and kitchen units. Some policies won't cover fixtures that can easily be removed. Others might limit your fixtures cover to a specific amount especially if the strata's policy doesn't have a high enough benefit limit to cover the cost of repairing the building.
- Your legal liability. This protects you if someone injures themselves or damages their own property inside your rental property.
Familiarise yourself with your strata's building insurance policy and if it doesn't cover these things to your expectations, you can find landlord insurance that will fill in the gaps.
These are usually offered by insurers that specialise in strata insurance and they'll probably offer landlord contents, loss of rent and malicious tenant damage cover too.
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