Landlord insurance: Subletting

Subletting is a bit of a grey area in landlord insurance, but we've done our best to clear things up.

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Lots of tenants sublet their home – whether it's one room, several or even the entire place. Unfortunately, when it comes to landlord insurance, the rules around subletting are a little grey.

Many landlord policies include a clause which says your policy won't cover damage if the property is being sublet – but it's not so clear how that works when the landlord isn't aware of what's going on.

What is subletting?

Subletting is when a tenant rents out their room, a spare room or even the entire home to someone else for a period of time, without changing the name on the lease.

This might happen when a tenant wants help with the rent or if they decide to move elsewhere but can't afford to break their lease.

In some cases, subletting happens on a small scale. For example, when people rent out their spare room or even their whole place on sites such as Airbnb, to make a little extra cash.

Why is subletting a problem for landlords?

Subletting might seem harmless, but if you're a landlord, it puts your property at increased risk of damage.

Importantly, subletting might not be covered by your landlord insurance, so not only are you at greater risk of having your property damaged, you might have to foot the bill for any repairs too.

How does landlord insurance work with subletting?

We took a look at four different landlord insurance policies to see what they said about subletting. Unfortunately, things are not exactly clear.

BrandWhat does the PDS say?What we think it means
Picture not describedLandlord insurance won't cover you if:
  • The building, if it is not being rented to tenants as their permanent residence. For example, the building is used for a short-term rental, holiday letting or house sharing arrangement (including an arrangement booked through an online booking platform)
  • Paying guests or boarders residing under a short-term rental, holiday letting or house sharing arrangement (including an arrangement booked through an online booking platform) or someone who lives with them or a person who entered the building with their consent
  • Squatters or trespassers occupying the insured address
The building isn't covered if you're letting your property out on a short-term basis, including Airbnb bookings.

You're not covered for damage if your renter sublets the house, or rooms in the house, to other people.

You're not covered for damage done by squatters or trespassers occupying the property.

Budget direct home insuranceYou must have a signed written lease agreement in place for four weeks before the loss or damage occurs.A written lease must be in place for four weeks before loss occurs for cover to be provided.

This would need to include any other people your tenant has staying with them – but not temporary guests.

Picture not describedLandlord insurance won't be valid while:
  • The premises is not occupied for more than 60 consecutive days by any household member, or tenants where you are a landlord, unless you have told us about it and we have agreed to cover you and it is shown on your policy schedule
  • Any part of the premises is being used as a hotel, motel or bed and breakfast accommodation
  • Any part of the premises is being occupied as their principal residence, by more than three unrelated persons over the age of 18 or by the policyholder and three or more other persons over the age of 18 not related to the policyholder, unless you have told us about them and we have agreed to issue cover
You won't be covered if your property isn't occupied by your specified tenant for more than 60 days.

You won't be covered if the property is being used as bed and breakfast accommodation – this could include Airbnb bookings.

You won't be covered if more than three unrelated adults live at the property. This could rule out many share houses – unless you let Youi know first.

Virginmoney logoCover only applies if you and the tenant have a signed written lease agreement which has been in place for at least four weeks before the loss occurs.You're only covered if you have a long-term lease agreement with your tenant.

What happens if a subletter defaults on their rent?

If you have rent default cover on your policy, you may be covered if the subletter defaults – but only if you weren't aware the property was being sublet.

Typically, rent default will only kick in if you've held a written lease with the tenant for at least four weeks. However, if the tenant sublets their property without your permission, it's likely the original tenant will still be responsible and you will be able to claim.

If you gave permission to your tenant to sublet, but didn't create a new contract with the subletter, it's unlikely you'll be able to claim.

It's a tricky area so it's best to contact your insurer directly to double check.

What happens if the subletters damage the property?

If you gave permission for your tenant to sublet your property, but didn't create a new lease with the subletter, it's unlikely you'll be covered for any damages they cause.

However, if your tenant sublets the property without your knowledge, you may be able to claim as damage by tenants and their guests is usually covered by landlord insurance policies.

As always, it's best to double check with your insurer. This is a particularly grey area in landlord insurance so we suggest going straight to the source to find out.

Is it time to switch landlord insurance?

When was the last time you had a look at your landlord insurance policy?

We did some research and found a huge $1,143 difference between two annual landlord insurance policies. It really pays to compare so you can find the best landlord insurance for you and your property.

Name Product Fire, Storm & Theft Damage Tenant Default and Damage Loss of Rent Accidental Damage to Home or Belongings Flood
Budget Direct Landlord Insurance

Optional

Optional
Optional
Save 15% on your first year's premium when you purchase cover online. T&Cs apply.
Westpac Landlord Insurance
Yes
Get up to 25% off for your first year. Promo code: COVER
St George Landlord Insurance
Yes
Save up to 25% when you purchase cover online. Promo code: COVER
Virgin Home and Landlord Insurance

Optional

Optional
Optional
Purchase a new eligible Virgin Home and Contents Insurance policy online and you'll also save 15% on your first year’s premium. T&C’s Apply.
QBE Landlord Insurance
Yes
Save 10% on your first years’ premium with QBE Landlord Insurance.
Qantas Landlord Insurance
Optional
Optional
Earn up to 20,000 Qantas Points when you apply. Points awarded will be based on your premium. T&Cs & exclusions apply.
Domain Landlords Insurance

Optional

Optional
Yes
Get 15% off your first year's premium when you purchase a new Landlord Insurance policy online. T&Cs apply.
Seniors Landlords  Insurance
Yes
Buy online and save up to 15% on landlord building and contents policies. T&Cs apply.
Youi Landlord Insurance
Yes
Cover for investment property from fire, theft and numerous weather events.
ANZ Landlord Insurance

Optional

Yes
Save up to 10% with two eligible insurance policies and 12.5% for three eligible insurance policies. T&Cs apply.
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