Landlord insurance at a glance
What is landlord insurance?
Like home insurance, landlord insurance can cover your rental property and its contents against risks like storms, floods and fire. It can also cover the damage that tenants can cause to your contents – and even loss of rental income.
Who should consider it?
Without landlord insurance, you could lose your valuable investment if it’s damaged or destroyed.
You could also lose income from rent if you’re unable to rent it out during repairs, or if your tenants get evicted or break their lease.
Did you know?
2.6 million Australians own an investment property.
(CoreLogic, Profile of The Australian Residential Property Investor, 2016)
If damage means you can’t rent your property for a while, landlord insurance can cover you for loss of rent
A landlord insurance policy can include cover for accidental damage, theft and malicious damage by tenants – as well as loss of rent if they leave without paying.
What can it cover?
Landlord insurance can provide you with extensive protection if your investment property suffers loss or damage. The exact cover you can receive depends on the policy that you take out. But to give you an idea, here are some of the benefits a landlord insurance policy may include:
| Potential benefits | |
|---|---|
| Automatic cover for flood and fire or explosion. | Automatic inflation adjustment if you need to make a buildings or contents claim. |
| Liability cover of up to $20 million for injury or loss of life to a third party, or loss of a third party’s property on a building you own. | Cover for loss or damage caused by tenants or their visitors (exclusions apply). |
| Automatic cover up to $10,000 for damage to landlord’s contents – like carpets, curtains, washing machines and portable furniture – and the option to increase cover for greater amounts. | Cover for loss or damage caused by electric motor burnout for appliances up to 15 years of age. |
| Catastrophe cover up to an additional 15% of the building sum insured, for declared natural disasters. | Tax audit cover (cover options of $2,000 or $5,000). |
| Optional cover for loss of rent or an absconding tenant. | Up to an additional 15% of the building’s total sum insured, to cover demolition and removal of debris, and architects and engineering fees. |
What usually isn’t covered?
Each policy is different, but generally you won’t be covered:
- For damage from tenant carelessness or neglect.
- For rust, corrosion, gradual deterioration or wear or tear.
- If your home is unoccupied for 90 continuous days.
There are other exclusions which your insurance broker can outline for you.
In addition, there is a deductible/excess.
CASE STUDY
Janet and Ross bought an investment property in Sydney’s inner west. They relied on the rent from the property to help cover their mortgage repayments. One year, they rented the property to some tenants who caused extensive damage to some of the walls, floor coverings and doors – and then left owing 12 weeks’ rent. Because the property needed repairs, Janet and Ross were unable to rent it out immediately. Fortunately, the couple had taken out landlord’s insurance and included the rent default option*. They successfully claimed on their insurance to cover their repair costs – and just as importantly, their missing rent. This allowed them to make their mortgage repayments and repair the property quickly so they could get new tenants in.
* Rent default is an optional extra for landlord’s insurance and attracts an additional premium.