An essential guide to landlord insurance

Owning rental property is a smart investment - until the unexpected happens. From tenant injuries to catastrophic damage, the costs can quickly pile up without proper protection. That's where landlord insurance comes in. This guide covers all you need to know about this must-have coverage for rental property owners. Let's get started.

An expensive looking cabin-like house. Owned by a landlord, obvs.
Photo by Vu Anh on Unsplash.

What is landlord insurance?

As a rental property owner, standard home insurance policies don't quite cut it. That's where landlord insurance comes into play.

Rather than cobbling together various policies, like home insurance and business liability coverage, landlord insurance conveniently packages the key protections property investors need under one roof.

This includes coverage for the physical rental dwelling against disasters like fires or storms. But also liability protection in case a tenant or guest suffers an injury on your property and decides to sue. Not to mention loss of rental income and a host of other protections.

Basically, it's an all-in-one solution that safeguards your valuable investment on multiple fronts.

What does landlord insurance cover?

Infographic showing common landlord insurance inclusions, including building and contents cover, loss of rental income, liability cover, legal costs and tenant damages.

While landlord insurance policies can differ significantly between providers in terms of coverages, limits, and exclusions, there are some common protections you'll typically encounter. These include:

  • Dwelling/building protection. This covers your rental property itself against disasters like fires, storms, falling trees and vandalism. If the structure needs major repairs or to be fully rebuilt, dwelling coverage has you covered.
  • Contents coverage. Don't forget about those detached items inside like appliances, carpets, blinds and any furnishings you've provided. Contents coverage protects that stuff you own within the rental.
  • Loss of rent. Let's say a covered incident leaves your rental too damaged to live in during repairs. Loss of rent coverage reimburses you for that missed rental income until it's habitable again. Some policies will even cover loss of rent if your tenant defaults on payments.
  • Liability protection. Accidents happen. If a tenant or guest injures themselves at your rental property and sues, liability covers the legal costs and potential settlements.
  • Legal expenses. Speaking of legal issues, this can help cover attorney fees if you need to hire a lawyer for things like evicting a problematic tenant.

In addition to these, there are other cover options you can add for an additional fee. We’ll cover those next.

What are some optional extras for landlord insurance?

Infographic showing common landlord insurance add-ons, including pet damage, disaster-prone area cover and cover for locks and keys

There are quite a few optional extras you can add to further customise your policy based on your specific rental situation and risks. Some of the optional extras you can consider tacking onto your policy include:

  • Rent default cover. No matter how well you get your tenants, financial hiccups happen. This cover is your peace of mind, ensuring you're not out of pocket if the rent stops coming in due to unexpected tenant troubles.
  • Tenant damage. Whether it's accidental stains or intentional vandalism, tenants can sometimes mess up your rental. This protection covers repair costs for damage they cause.
  • Lock replacement. This will replace your locks and keys if the keys have been stolen or there’s reason to believe they’ve been duplicated without authorisation.
  • Disaster-prone area cover. If you live in a flood or bushfire zone, you may be required to pay an additional premium to be covered for those events.

It’s worth noting that some policies will offer one or more of these as part of their standard package, no additional fee necessary. However this is not always the case, so it’s important to refer to your product disclosure statement (PDS) to be absolutely sure what you’re covered for and what you’re not.

How much is landlord insurance?

Landlord insurance isn't a one-size-fits-all deal. The price depends on a few things:

  • Your property. Location, size, and building type significantly affect insurance costs. For example, a spacious home in a well-to-do neighbourhood might have different insurance premiums compared to a compact house in a more remote area. Additionally, properties located in flood zones or areas with higher environmental risks could see an impact on insurance pricing.
  • Your coverage. Do you want protection from things like tenant damage, rent default or special flood cover? The more coverage you choose, the more you'll typically pay.
  • Your excess. This is the amount you pay out of pocket before insurance kicks in. A higher excess can lower your premium, but it means you'll have to pay more upfront if something happens.

To get an accurate idea of how much you'll pay, it's best to contact an insurance company directly. They can give you a specific quote based on your individual situation.

House vs. strata-controlled property insurance

Insuring your home takes a different turn based on whether it’s a standalone house or a strata-controlled property.

For a house, securing building insurance is key. This insurance covers the entire structure and any permanent fixtures, crucial for protection against serious damage and unforeseen events.

In strata-controlled properties, the scenario shifts. The strata's master policy often covers external structures and common areas, which means individual owners might not need to worry as much about the building itself.

That's where strata title insurance steps in for unit owners. It complements the strata's master policy by focusing on the specifics inside your unit:

  • Internal fixtures and fittings. This includes coverage for things like carpets, lighting, and blinds — items not covered by the strata's master policy.
  • Personal contents. Protects your belongings within the unit, from furniture to gadgets.
  • Liability protection. Covers you for legal liabilities that occur within your unit.

Strata title insurance essentially fills the gaps, ensuring the parts of your property and liabilities not covered by the strata's master policy are protected.

What does landlord insurance not cover?

While landlord insurance offers a safety net for many scenarios, there are common exclusions to be aware of. Here are some typical exclusions:

  • Lack of maintenance. Failing to keep the property in good repair can lead to problems that most insurers won’t cover you for including damage from tree roots affecting the foundation, termite infestations and mould growth.
  • Unauthorised repairs. While minor maintenance and repairs like fixing a leaky tap can typically be handled without direct consultation, significant damage repairs should align with your insurance provider's guidelines.
  • Unoccupancy. Claims may be denied if the property has been unoccupied for an extended period beyond what your policy allows.
  • Specific natural disasters. Depending on your policy, events like floods or earthquakes might not be covered unless specifically added as an option.
  • Intentional damage by the landlord. Any damage you cause to your property intentionally is not covered.
  • Wear and tear. Gradual deterioration of the property over time is generally not claimable.
  • Illegal activities or contraband. Any damages or claims arising from illegal activities conducted on the property.

Remember, the key to understanding the full scope of your coverage, including all exclusions and limitations, is thoroughly reviewing your product disclosure statement (PDS). This document provides crucial insights into how to ensure your claim is valid and avoid potential denials.

What about commercial landlord insurance?

It’s all in the name. Commercial landlord insurance is for property investors leasing out a space to a commercial business. Many of the same principles apply as the residential scenario regarding inclusions, exclusions and other considerations.

The main differences relate to the nature of the business operating in the space. If your premises includes business-use machinery and fixtures, like in-built fridges and cooking appliances in a restaurant, you may want to cover these specifically under contents for breakdown and theft. Since rental payments are linked to the viability of the business, this is also something to consider when taking on tenants or purchasing a property for use in a specific industry.

Remember: Commercial landlord insurance is very different to business insurance packages or commercial property insurance, which should be used by business owners who own and operate within a property.

How to find the best landlord insurance

A great way to begin your hunt for the best landlord insurance policy to suit your needs is with the Mozo Experts Choice Landlord Insurance Awards. An award-winning policy is always one worth considering.

Mozo Experts Choice Landlord Insurance Awards 2023

In our search for the 2023 Landlord Insurance winners, Mozo's team of expert judges assessed 33 policies across 41 providers. If you want to utilise the selection criteria for your own research purposes, you can check out how they crunched the numbers in the awards methodology report.

FAQs about landlord insurance

How is landlord insurance different to home insurance?

A major factor is that landlord insurance can cover loss of rental income, while home insurance doesn’t. It won’t be claimable in every circumstance and can take time to be paid out, so make sure you read the details around this in your PDS.

Landlord insurance will also often cover additional legal costs, generally for representation throughout the process of evicting a tenant by court order or making a legal claim for rental loss.

How do I make a landlord insurance claim?

Like most insurance products, this involves contacting your provider – with your policy details at hand – and beginning the claims process in whatever format they offer (online, over the phone).

Photos or other proof of damages will help bolster the perceived validity of your claim, as will bank records in the case of rental loss. If the claim relates to a theft, make sure you file a police report and also have those documents or details to share with your insurance company.

If repairs are necessary, make sure you consult your insurance provider on how to go about organising this. Go through any nominated inspectors and providers to get work done if that condition is stipulated in your insurance policy. If your claim needs to be escalated legally, follow the insurance company guidance.

Is landlord insurance tax deductible?

Depending on your circumstances, it can be. Building, contents and public liability insurance falls under investment maintenance and management expenses, and therefore is claimable for your investment property taxes. Optional extras may not qualify for this.

Is landlord insurance worth having?

Landlord insurance could be worth having, because there are inherently extra risks around when renting out your home to strangers. No matter how thoroughly tenants are assessed, you never know how they might inadvertently or maliciously damage your property. Plus, landlord insurance covers the unforeseeable events all owners would want their properties covered for.

Which landlord insurance is best?

The best landlord insurance for you will depend on your circumstances and what you’ll need the policy to cover. For instance, you may want to insure your property against any possible damage by a tenant, but a particular policy only offers cover to bushfires. So it’s a good idea to think about what will be best for you.