Landlords make up a significant portion of the overall housing market in Australia. According to the most recent ABS data from the 2019-20 financial year, approximately 31% of households were renters, 26% of which were from private landlords.
With over a quarter of all homes in Australia owned by a landlord, offering specialist cover is more than just hitting a niche gap in the market. There are plenty of insurers that provide policies tailored to those who own investment properties, so it’s all about knowing where to look before you choose your cover.
What is landlord insurance?
As the name suggests, landlord insurance is a type of specialist home insurance policy designed to offer cover for homes that are rented out by their owners. It provides protection against loss or damage to your home under certain covered events.
Landlords looking to cover their investment property will need this type of insurance in most cases, as standard home insurance will offer limited or no cover for non-primary residences.
What does landlord insurance cover?
As mentioned, the primary purpose of landlord insurance is to cover the loss of or damage to your home’s structure. While it comes with many of the same inclusions as a regular home insurance policy, there are several landlord-specific events that can come as standard or included as optional extras. These are:
- Loss of rent: this inclusion offers cover in the event you lose out on rental income due to your home becoming uninhabitable. Your rental income can be covered for up to 12 months by some lenders.
- Malicious damage by tenants: if your tenants are responsible for malicious damage to your home, you can be covered by your policy.
- Liability cover: you can also be covered for legal liability if someone is injured or has their belongings damaged while on your property.
- Rental default cover: if your tenant defaults on their rent but stays in your property, you can also be covered by rental default cover. This is typically an optional extra and may be available up to between $5,000 and $10,000.
The other standard events that can be included (and those that usually aren’t) are:
- Escape of liquid (such as a burst pipe)
- Explosion
- Fire
- Impact (such as a tree falling onto your house)
- Lightning
- Natural disasters (such as earthquakes, tsunamis and cyclones)
- Riots or civil commotion
- Storm
- Theft, attempted theft, malicious damage or vandalism
- Actions of the sea (such as damage caused by high tides or tidal waves)
- Acts of war
- Animal or pest damage
- Damage caused during renovations or defective construction/workmanship
- Damage stemming from existing damage
- Leaving your home vacant for two to four months consecutively
- Not adequately securing your home
- Tree lopping
- Wear and tear
Does landlord insurance include cover for contents?
If you’re renting out a fully or partly furnished house, apartment or unit, you can opt to add contents cover to your landlord insurance policy. This means you can also be covered for damage to things like your furniture, electronics such as your TV, fixtures and fittings like toilets and showers and whitegoods such as your washing machine.
If your rental property isn’t furnished, you may not need to take out contents insurance. However, you may decide you need it anyway if your landlord building insurance policy doesn’t offer the cover you want for the home’s fixtures and fittings.
Is landlord insurance mandatory?
If you have a mortgage on your rental property, landlord insurance will be compulsory as a condition of your home loan agreement with your lender. This is the same with home loans for owner-occupiers, as lenders will make sure there’s a fallback option in the event your home is damaged or destroyed and they’re unable to recoup their funds from its sale.
You can choose your preferred landlord insurance policy, rather than going with one your lender recommends. That means it’s crucial to take the time to find the one that suits your needs to ensure you get the best value for money and appropriate coverage.
How much does landlord insurance cost?
There are many factors that can influence the cost of your landlord insurance policy. We’ve taken some quotes for properties in capital cities and regional locations across the country to see how much you might expect to pay:
The cheapest place on average to insure a house in the areas above is Hobart, followed by Burnie, Melbourne, Mount Barker and Ballarat. Darwin and Ipswich are comfortably the most expensive at well over $2,000 each, with Brisbane the next highest at just under $2,000.
For apartments and units, Mount Barker is the cheapest for contents insurance at $269, with the two Tasmanian locations just behind. Darwin is again far and away the most expensive at more than $500, but Margaret River and Sydney are the second and third-most expensive.
The factors impacting your landlord insurance premium
Aside from where you live and the type of insurance you choose, there’s a range of variables that will have a say in determining the cost of your policy. These include:
- Nominated replacement cost: the amount you choose to insure your investment property’s structure and/or contents for will have a significant bearing on the premiums you pay.
- Building materials: what your property is made from may have an effect on its overall security. You may pay more for a wooden build than a brick one, for instance.
- Your claims history: property owners who’ve made claims for home or contents damage in the last five years will pay more than those who haven’t.
- Policy inclusions and optional extras: you might find that policies with landlord-specific events like loss of rent included as standard may cost more than those that don’t. Adding optional extras will also obviously increase the cost of your policy.
- Whether you have a written rental agreement: if you don’t have an agreement in place with your tenant, you’re likely to pay more or have coverage denied by insurers due to the decreased security.
How to compare landlord insurance policies
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Inclusions and exclusions
Of course, you’ll need to make sure that any policy you buy offers the cover you need. Whether that’s building insurance, contents insurance or a combined policy, check your Product Disclosure Statement (PDS) before signing on the dotted line. This is especially important for landlord-specific cover like malicious damage and loss of rent.
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Policy premium
Although having adequate coverage is the name of the game, you also don’t want to be paying through the nose for it, either. Take the time to find a policy that strikes the right balance between suitable inclusions and a premium that doesn’t break the bank.
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Optional extras
Are the extras available worthwhile for you? Consider whether you’ll get value for money by adding things like tenant default cover and increasing your overall premium.
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Discounts or incentives
Many insurers offer bonuses to new customers who sign up with them or those who bundle multiple policies together, such as car insurance. While these offers may be attractive for the first year, make sure you know what you’re getting after they expire.
