- Landlord insurance can help protect your rental income and your property.
- But not everything is covered, making it essential to read a policy's PDS carefully.
- Policies differ widely in cost and inclusions and premiums are generally tax-deductible.
Buying an investment property and becoming a landlord comes with significant responsibility - and risk. Safeguarding your asset and rental income should be a top priority, as losing tenants or a rentable property can make it harder to meet your investment mortgage or achieve worthwhile returns. That’s where landlord insurance can come in to offer protection.
What is landlord insurance?
Landlord insurance can offer financial protection to property investors if their rental property is damaged, left untenanted, or if they need to defend or pursue legal action related to a tenancy.
There are generally four components of landlord insurance:
- Coverage for loss of rental income
Potentially helpful if a property is damaged and needs repairs or unintentionally vacant for long periods - Building insurance
Which covers damage to the property’s structure - Contents insurance
For protection against damage to what’s inside the property (e.g. carpet, appliances) - Landlord liability and legal expenses cover
Which may help cover legal costs and compensation claims related to tenancy disputes or death or injury occurring on the property
Landlord insurance is offered by most major general insurance providers and can apply to all sorts of investment properties, whether it’s a house, unit, apartment or townhouse, so you’ve got plenty of different products to compare.
Related: A quick guide to contents insurance
What does landlord insurance cover?
Examples of the sort of happenings that a landlord insurance policy may cover you for include:
Tenant-related risks
- Damage or theft by tenants
- Loss of rent and default
- Legal expenses involved with taking tenants to court
- Liability
Building and contents damage
Damage to the building structure and contents (e.g. curtains, carpet, appliances, light fittings) as a result of:
- Fire, flood, or storm
- Falling trees
- Vandalism
- Water damage
These are just some of the more prominent examples of what’s covered by landlord insurance. There are more obscure things that will vary from provider to provider, like the replacement of locks.
Savings.com.au’s two cents
If you're renting out an investment property, landlord insurance can give you protection for a wide range of events like natural disasters, water damage, theft, tenants vanishing, or a loss of rental income. And as an investment expense, the premiums are generally tax-deductible.
Doing a thorough check of a number of different policies can give you an idea of what is and isn't typically covered.
It’s also important for landlords to have a valid lease agreement in place and keep up regular property inspections. This can help make the process of submitting a claim easier.
Let’s look at a few examples of how landlord insurance could bail an investor out.
Case study #1: Damien has a tree-reffic policy
Damien owned a nice little investment property that he collects a sturdy rental income from, but during a big storm, a tree in the backyard fell on the roof, rendering it unliveable for two months.
As per the terms and conditions of his policy, Damien is covered for ‘impact’ caused by falling trees, and his policy covered him for both the rental income he lost while his tenants were displaced as well as the cost of fixing the roof.
His tenants were back in the house to help line his pockets in no time.
Case study #2: Julia’s tenants try to take her for a ride
Julia also owns an investment property and the current tenants are moving out at the end of her lease. The fridge in the property is owned by her and was on the lease, but after the tenants move out, she realised it’s not there – they’ve stolen it!
Her policy states she is covered for theft or burglary by her tenants or their guests worth up to four times her weekly rental amount. Since the fridge was worth about $1,000, her insurer is able to replace the fridge for her. Thankfully, those tenants were blacklisted by her rental agency.
As with pretty much every type of insurance, landlord insurance isn’t perfect and won’t always cover you for these things based on the terms and conditions of the policy.
What does landlord insurance not cover?
Although most things that cause damage to the property or loss of rental income are covered, there are a few things that aren’t. This will again depend on the T’s and C’s, but here are some of the common exclusions:
- General wear and tear
- If you or someone under your instruction damages the property
- If you breach your lease agreement (rather than your tenants)
- Damage caused by insects or rodents
- Damage to any part of the property you don’t rent out
It's also common, but not necessarily the norm, for landlord insurance to not cover damage caused by pets. If there's a pet living in your rental property, it's worth checking to ensure your insurance covers any potential damage that pet may cause.
Case study #3: Damien in a ruff spot
Poor Damien has had to make another claim – this time because his tenants left their pet dog Spot alone in the house while they went to work. Since the dog hasn’t yet mastered the art of using the toilet, it did its business multiple times all over the carpet, leaving some nasty stains all over the place.
While Damien allowed the tenants to keep their pet, his insurance policy explicitly states it does not cover damage caused by pets or other animals. His claim is rejected, and he has to pay to get the carpet cleaned himself.
What is landlord public liability insurance?
Public liability insurance typically covers a person or business for costs associated with legal action if they're found liable for death or injury, or loss or damage to property caused by negligence. In the context of landlord insurance, this cover is designed to protect landlords if a tenant or visitor is injured or suffers property damage while on the rental property.
Most landlord insurance policies include a form of public liability insurance, although it's still important to check the product disclosure statement (PDS). Some policies provide liability cover of up to several million dollars and may cover costs such as:
- Damages awarded to the tenant
- Legal costs involved in defending a claim
- The tenant's legal costs, if the landlord is found to be at fault
Does landlord insurance cover rentals offered on short stay platforms?
Specific landlord insurance policies exist for people who choose to rent out their property for a short period of time, such as those listed through Airbnb. These policies cover situations unique to short-term rentals, such as a guest’s failure to get out when their stay is complete.
The rental listing sites themselves (like Airbnb and Stayz) also offer their own form of protection. Airbnb, for example, has ‘AirCover’ policies which provide liability cover and protection against damages caused to the property and usually excludes the same things that standard landlord insurance policies typically exclude.
Airbnb and Stayz’s policies are not a substitute for landlord insurance. The Insurance Council of Australia (ICA) warned people who rent their properties out on a short-term basis might not be covered if they don’t have any landlord insurance.
How much does landlord insurance cost?
Just like with regular home and contents insurance, there isn't a one set premium for landlord insurance policies. The cost of a policy is determined by a very broad range of factors like:
- The value of your property and the contents within
The more you insure the higher the premiums as a general rule - The type of property you have
Houses may be more expensive to cover than units or townhouses - The structural integrity and environmental risk of the property
Buildings made of sturdier materials and in low-risk locations tend to be cheaper to insure since they’re seen as safer - Your claims history
Insurers can increase premiums if you’ve made lots of other claims before - The security of the property
Bolted doors, alarms, and security cameras make theft less likely and can also boost your chances when making a claim - Additional inclusions
Choosing to include additional things in your coverage can make a policy more expensive
To get an estimate of how much you could have to pay, most insurers allow you to generate a quote online.
Are landlord insurance premiums tax-deductible?
Expenses related to renting out an investment property are generally tax deductible, and insurance premiums are counted as such. Interest repayments on an investment home loan are also claimable, as-is:
- Advertising to find new tenants
- Body corporate fees, cleaning costs and council rates
- Electricity and gas not paid by the tenant
- Legal expenses and land tax
- Property manager fees and commissions
- Repairs and maintenance
How to make a landlord insurance claim
To make a landlord insurance claim, you'll need to contact your insurer. It will likely ask you a series of questions, so make sure you’ve taken lots of notes and have before and after photos handy, as well as receipts if it’s an item you’ve purchased. You can also download claim forms from some insurer’s websites.
Depending on the claim, you might also need the following items:
- Copies of the lease agreement
- Copies of communication with tenants, including notices
- A breakdown of bond deductions
- Quotes for repairs or maintenance
- Inspection reports etc.
In some cases, like theft, you should first contact the police, or emergency services in the event of significant damage to the property.
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