Landlord Insurance - What Does It Cover & Is The Extra Cost Worth It?

Angela Moss0

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If you're thinking about property investment for rental purposes, your insurance options as a landlord will have crossed your mind.

We all know that ‘stuff’ happens. Crazy weather, accidents, misadventures, unprecedented times… They can cause financial loss, wreak havoc on your property and leave you scrambling for money to fix the damage. 

Having landlord insurance can give you the peace of mind to make a claim and avoid financial hits. But it will add to your costs. 

In this article, we’ll be looking at Landlord Insurance for Australian property owners and if the extra cost is worth it for you. We’ll delve into:

  • What is landlord insurance?
  • What does landlord insurance cover?
  • What isn’t covered by landlord insurance?
  • If landlord insurance still applies to short-term rentals, like Airbnb, and
  • What to consider when looking for a landlord insurance policy. 

What Is Landlord Insurance?

Landlord insurance is a type of insurance policy that protects property owners from certain types of damage and financial losses related to renting out a property. 

Even the tenant of your dreams can cause accidental damage. And if you’ve been unfortunate enough to have a tenant from hell… You know it can lead to costly property vandalism, missed rental payments, and potential legal expenses. Not to mention a permanent tension headache. 

It isn’t mandatory to have landlord insurance to rent out a property in Australia. However, as the property owner, you have a contractual obligation to upkeep maintenance when the property is damaged and adhere to health and safety codes. Another thing to consider is that, as a landlord, you are open to public liability. 

Having a good landlord insurance policy can make it easier for you to find the money to meet legally obligated repairs to damage and protect you from financial loss and legal liabilities.

What Does A Landlord Insurance Policy Cover?

When it comes to landlord insurance policies, different policies and insurance companies will cover different scenarios. 

Generally, the following incidences are inclusions covered by standard landlord insurance policies. However, it is dependent upon the individual insurance policy provider and the type of policy you choose:

  • Natural disasters such as flooding, fire, storms, and earthquakes.
  • Water damage.
  • Theft.
  • Damage by impact.
  • Lease breaks and evictions.
  • Public liability.

The main areas of coverage in a standard landlord insurance policy agreement that people look for are:

  • building insurance,
  • liability insurance,
  • contents insurance, and
  • loss of rental income cover. 

If you have building insurance, you will be covered for structural damage that is the result of an event agreed upon in your insurance policy. 

Structural parts of your property usually covered include certain fixtures and fittings, pipework, plumbing, fixed appliances, and external features such as awnings, to name a few. 

Building cover will also protect you from damage to the property caused by the tenant, which is not a matter of general wear, tear, and maintenance. The following types of damage are generally covered:

  • Malicious damage - This defines damage caused on purpose, with malicious intent. For example, a tenant deliberately puts a hole in the drywall. 
  • Intentional damage - This defines damage that is intentionally caused, but without malicious intent. For example, a tenant undertakes remodelling without permission, such as painting walls in interesting colours. 
  • Accidental damage - This defines damage that occurs by accident, with no intent behind its cause. For example, a tenant trips, and in an effort to catch their fall, they damage the drywall. 

If your investment property is a residential unit, you should investigate strata title protection. Insurance for the structure of the building is covered by the body corporate. However, if the body corporate has failed to insure the building adequately, costs will flow onto you. Having strata title insurance offers you an extra layer of protection, particularly if you have undertaken building improvements for your property which has increased the value beyond the original assessment.  

Liability Insurance

As the homeowner, you could be liable for compensation claims and legal fees. Any accidents that may befall tenants and their guests which result in injury can be costly for you. Landlord insurance offers liability cover to protect you financially from such matters.

Contents Insurance

Most landlord insurance policies will either already include, or give you the option to add contents insurance. Having this in place will cover your belongings from damage, theft, or loss. This will not cover the belongings of your tenants. If you are renting out a furnished home, contents insurance is an important consideration. 

Loss of Rental Income Cover

Some landlord insurance policies will offer you cover from rental payment defaults resulting from a broken lease, missed payments, or if a tenant is unable to continue to pay. Protecting yourself from loss of rent is important, particularly if you are using rental payments as a means to pay off an existing home loan.

Some policies will also cover you for costs associated with legal action against a tenant, for matters such as eviction and recovering money owed to you. 

What Isn’t Covered By Landlord Insurance? 

No insurance policy will protect you from every scenario you will face as a landlord. If it did, the cost of your premium would be astronomical to cover the overload of risk for the insurance company. 

Generally, standard policies have exclusions for the following types of incidents:

  • General wear and tear - Routine maintenance and fixing the general issues that crop up for any property owner are usually not covered. These are considered run-of-the-mill costs for property ownership. 
  • Disaster-prone properties - Weather events/disasters for properties in areas prone to this activity may not be able to secure insurance for these issues. This is dependent upon the insurance policy provider. 
  • DIY repairs - Repairs carried out by unqualified parties, such as the tenant or the landlord are considered risky by insurance companies. Have your repairs performed by a licensed tradie to ensure they’re covered. 
  • Tenant contents - It is the responsibility of the tenant to have contents insurance to cover their own belongings. 
  • Building defects - These are not considered a risk stemming from the act of renting out your property. Insurers often view this as a pre-existing condition. When buying an investment property, have a thorough check done before signing on the dotted line. 
  • Changes to market conditions - Financial loss due to shifting markets are considered to be part of the risk property investors must face. You won’t be able to claim for lower rental yields due to market changes. 

What About Short-Term Tenancy Agreements? Do I Still Need Landlord Insurance?

A claim against your own home and contents insurance can run the risk of being denied if you were renting out the property at the time the damage/incident occurred. 

Hosting companies such as Airbnb and Stayz offer protections for hosts. But, the Insurance Council of Australia (ICA) has warned against relying solely on hosting company protections. They can fall short in some areas.  

The ICA suggests property owners invest in short-term landlord insurance. With this option, you’ll only pay the premium for the duration of a tenant’s stay. 

Is Landlord insurance tax deductible?

Yes, the good news is that landlord insurance is in most cases fully tax-deductible as part of the cost of operating the rental property and ensuring the investment operates well.

Be sure to note the annual expense (evidenced by the insurance statement amounts) on your tax returns.

Is Landlord insurance mandatory?

No. You can get landlord insurance at your discretion, and a mortgage lender will typically not require you to have landlord insurance in place.

A mortgage lender will however ask you (and require you to have proof of) the Buildings Insurance for any property they are lending on. Building Insurance is on the physical dwelling itself, covering the dwelling from disasters such as fire, flood, natural disaster, and other major damages.

What To Consider When Organising In A Landlord Insurance Policy

You’ll need to consider the following when looking into landlord insurance:

What level of cover is right for you?

This will depend on:

  • The type of property you’re renting. 
  • If you need short-term or long-term insurance.
  • The property’s value and if any renovations or additions have added specific value.  
  • If there are any optional extras you want to consider, such as pet damage, or disaster-prone area coverage. The optional extras available to you depend on the policy and provider. Note that they will increase the cost of landlord insurance.

What excess and premium costs are you comfortable with?
The excess is the upfront amount you commit to paying on a claim. Increasing or decreasing your excess will lower or raise your premium. You’ll need to strike a balance between the excess and premium to find what works for your situation.

When looking at a landlord insurance policy it’s important to do a thorough check of the Product Disclosure Statement (PDS). This is where you’ll find information on what is and isn’t covered. 

Landlord insurance can be costly, however, your premium may be tax-deductible. It’s worth discussing this with your accountant or checking with the Australian Taxation Office (ATO).


So, is landlord insurance worth it? 

Having an insurance policy is always going to add costs. And no one likes spending more money than they have to. However, not having adequate protection can end up costing you more in the long run.

Anyone who has been in the rental game for a while knows that Murphy’s Law often applies - anything that can go wrong will go wrong. 

Sure, there are many lovely tenants out there who will pay rent on time and treat your property with care. But even the good ones can have a costly mishap. It’s also an unfortunate truth that many bad apples exist. 

Landlord Insurance can help you avoid losses related to rental property damage, rent defaults, liabilities, and legal costs when things go awry. The added peace of mind alone can be worth the premium. 

There are plenty of different policy types and providers out there. Before settling on a landlord insurance policy, list your individual needs, do your homework, and choose a policy that suits your situation and budget. 

Your Next Steps

Property investors need to consider costs not only of landlord insurance but interest costs on the mortgage as well.

This is where having a completed YouBroker profile can help.

We can help you work out how much you can borrow using your portfolio equity, and figure out your best home loan options with our home loan rate comparison tool. Plus, once you have a YouBroker profile, it's easier to maintain in one portal versus having to use a different form or comparison site each time to get answers and personalised borrowing support. We even help you obtain free periods of insurance cover from our insurance partner, Allianz. Allianz offers great value home, contents, and landlord insurance at direct prices through YouBroker.

As part of our convenient YouBroker service, we help you understand:

  • Your funding position which shows key components such as Stamp Duty, the loan amount, and your downpayment or equity;
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  • Analysing what home loan product offers the right fit for your goals and needs, with the right discount or mortgage rate.
  • Help you to navigate the real estate buying or refinance process, so you stay ahead of each step and know the upcoming milestones and what to expect on your homeownership journey.

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