Landlord insurance cover can save you when rent isn't paid, or when a renter damages your property.
As a landlord, you're going to want a safety net for common occurrences that can result from tenants, such as unexpected vacancy and a loss of rental income, plus building and contents damage. In an emergency, landlord insurance will cover crucial costs to keep your investment profitable.
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What is landlord insurance?
Landlord insurance can protect you from tenant-related risks that normal home and contents insurance policies don't, such as loss of rental income. And the great news is, because an insurance policy for an investment property is an investment expense, your policy premium is tax deductible.
A landlord can rent their property out long-term or short-term. Some insurance policies exist to cover-short term rental landlords who rent out one section of their own home or who use websites like Airbnb, though most policies are targeted at long-term rentals.
What does landlord insurance cover?
There are three main areas of broad protection that landlord insurance offers for your building and its contents:
- Loss of rental income. If your tenant moves out without giving proper notice, fails to pay their rent, dies or a court determines that they are experiencing financial hardship and cannot pay, your landlord insurance will cover you. Rental income lost by an unlivable, damaged property, or limited access to the property from damage surrounding it (such as after a natural disaster) is also covered.
- Damage to the building. Landlord insurance covers insured events like fire, flood, storm and water damage, including demolition, removal of debris and rebuilding costs of the property. It also covers intentional and malicious damage, theft, pet damage and scorching from cigarettes or pots and pans. This is what a standard building insurance policy will cover you for.
- Contents that you own. This includes carpets, rugs, curtains, blinds, above-ground pools and any manchester, linen, electrical appliances and other portable household items that you own in the property while renting it out. This is what a standard contents insurance policy will cover you for.
Landlord insurance policies also include benefits such a legal and representation expenses, sheriff and bailiff expenses (when a tenant needs to be evicted), tax audit costs, legal liability cover (if someone dies in the property, or if another person's property is damaged), lock replacements and the removal of a tenant's possessions if left in the property.
Be sure to check the PDS carefully before signing up to ensure that what you need of the above is covered.
Does landlord insurance cover loss of rent?
Yes, landlord insurance does cover the loss of rental income in certain situations.
If your renter moves out without giving the proper notice, you won't experience any financial loss as your policy will cover you. This also applies if the tenant does not pay their rent, if they die or if a court determines that they are experiencing financial hardship and cannot pay their rent.
Does landlord insurance cover vacancy?
Vacancy is covered by landlord insurance in certain situations. Some policies cover you for up to 90 days if your property is vacant, but you should let your insurer know if the property will be vacant for a longer period as there may be special conditions applied.
When a renter breaks the terms of a lease and moves out early without paying rent, then yes, you are covered. If a tenant has sadly died and they are the sole person on the lease, you may be covered for the loss of rent as a result of their passing.
However, if the property is vacant for an extended period of time, 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, then you won't be covered.
Can I get landlord contents insurance?
Some providers do offer the option of contents insurance for landlords, which is ideal when you rent out your property fully furnished.
Contents insurance covers theft, break-ins and damage from natural events to all furnishings, as well as fixtures, fittings and structural improvements like curtains, carpets and a renovated kitchen.
If your rental property is part of a strata, group or community title plan, the building cover may already be taken care of and contents insurance may be all you need.
What doesn't landlord insurance cover?
There are certain situations in which landlord insurance won't cover you. These include:
- If you, your family or anyone acting with permission from you causes damage to the property.
- If, when renovating or extending a property, water enters the building through an opening part of this work and causes damage.
- Bad housekeeping by your tenants. Unhygienic or untidy living habits can cause some damage, like stains on the walls.
- Wear and tear. You won't be covered for things associated with the general ageing of your home, like rust or mould.
- Any damage caused by insects or vermin like mice or rats.
- Repairs that are carried out by the tenant with your consent.
- If you breach the lease agreement, for example, by cutting your tenant's lease short.
- Any damage or loss that occurs while real estate agents or contractors have the keys to the property while performing property inspections or doing property work.
- If you've allowed your tenant to use the property for trade, manufacturing or childcare.
- If you move into the property and use it as your main place of residence.
What to look for in a landlord insurance policy
Consider what cover is important for you when looking for a landlord insurance policy.
- Are you renting your property furnished or unfurnished? Landlord insurance usually covers both the building and the contents, but double check your policy. If you're renting your property fully furnished, it would cost a lot to replace all of your items if they were stolen or damaged. Building-only home insurance will only cover you for the building itself, not for the carpet and other fittings.
- Do you allow tenants to have pets? As cute as they are, pets can potentially do a lot of damage to internal fittings such as curtains and carpets. Not all policies cover pet damage, so check the PDS before signing up.
- Is the property in a high-risk area? Does the local area frequently experience floods, cyclones or bushfires? Check that these disasters are covered. This can also affect the cost of your premiums.
- Is your tenant subletting? Share houses are common, so keep in mind that only the tenant listed on the lease is responsible for loss and damage to the home or for rental arrears. A landlord insurance policy is issued based on a number of factors, including the rental agreement. Subletting is often excluded as it increases the risk of damage to a property.
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