Do I need landlord insurance and what does it cost?
For anyone investing in property, landlord insurance policies can be a way to protect your investment and yourself financially if something goes wrong. But does every property investor need landlord insurance? And, if so, what does it cost?
6-minute read
What you’ll learn
- What is landlord insurance?
- Do you need landlord insurance?
- What type of policies are there?
- What does landlord insurance cost?
- What happens if you don’t have landlord insurance?
What is landlord insurance?
Investing in rental property is one strategy people use to build wealth. But it can also come with inherent financial risks. From tenant-related issues to unexpected damage, landlords face unique challenges that standard home insurance usually doesn’t cover.
Even if you are confident you have reliable tenants, you can’t account for unpredictable events. Here are some key reasons why landlord insurance can be important to help protect your investment against potential financial losses and provide relief from investment property-related financial stress.
Rental property damage
In most cases, landlord insurance covers loss or damage due to vandalism and malicious damage caused by tenants or their guests damage caused by natural disasters (fires, storms, floods) and accidental damage.
Loss of rental income
Landlord insurance can cover the loss of rental payments if the tenant defaults on their rental agreement or vacates early, or if the property becomes uninhabitable due to damage caused by an insured event like a flood or bushfire. This cover may be included or offered as an option.
Liability cover
If a tenant or visitor is injured due to issues with the property, landlord insurance may cover legal and medical costs as part of the legal liability insurance that is included in most landlord insurance policies.
Legal costs
If your tenant breaches their lease agreement or damages the rental property in some way, landlord insurance may offer the option of additional cover to assist with legal expenses in tenant disputes or if you need to take action against them.
Contents coverage
Landlord contents cover can include insurance for furniture, appliances and fittings against theft or damage if you rent out a furnished property, or if you have provided some contents (such as white goods or a BBQ) for tenant use.
Strata gaps
Strata insurance may cover the building structure if your property is part of a strata, but Landlord insurance can cover any internal fixtures which are not covered by the strata insurance.
So, whether you own one rental property or have a portfolio of investment properties, having appropriate coverage that’s right for your situation can help ensure your investment remains secure.
Our guide to what you need to know about landlord insurance provides further insight into the question ‘what does landlord insurance cover?’
Do you need landlord insurance cover?
While it’s not a legal requirement, investment property owners may need landlord insurance in place as a condition of their investment property loan. Standard home insurance typically doesn’t cover damages or liabilities when a property is rented out, while landlord insurance is specifically designed to cover landlords for things associated with renting a property to tenants, like property damage, legal liability and lost rental income.
Home & contents insurance vs landlord insurance
Why is landlord insurance so important? Imagine if, during a storm, a tree falls on a house that you own, causing substantial damage to the roof and several internal rooms. Here are two scenarios:
If you live in the house… having home & contents insurance could cover the cost of repairing the damaged roof and interior (if storm cover is included in your policy). It could also cover replacement of your personal belongings.
If the house is rented to tenants…having landlord insurance might cover some of the same things a home & contents insurance policy covers, but there are other things specific to an investment property, like loss of rent while the house is uninhabitable, that are covered by landlord insurance. It may also cover the costs of any additional property damage caused by exposure to the elements after the event, or damage caused by the tenants while moving out.
The key takeaway here is that if you rent your property out, landlord insurance could be a great option to cover you for financial losses associated with your investment. Remember, you should always consider professional advice and research thoroughly to make sure you get the right cover for your financial situation.
What types of landlord insurance policies are there?
Landlord insurance covers investment properties from freestanding houses to apartments and townhouses. The type of property insurance you need will depend on the type of property you have and the specific things you want to insure.
Most landlord insurance policies cover two main areas, building insurance and contents insurance. You need to work out whether you need one or the other of these (or both).
Building insurance
Landlord building insurance covers loss of or damage to the physical structure. This is a good option for landlords who own a freestanding property, or a property not covered under a strata.
Use this building insurance calculator to help determine how much cover you might need (your building sum insured).1
Contents insurance
Landlord contents insurance covers damage to any items you own that are kept at the rental property for the use of tenants, including appliances, furniture or even a BBQ.
Use this landlord contents insurance calculator to help work out how much landlord contents cover you might need (contents sum insured) for your investment property.1
Landlord insurance can also cover things like loss of rental income and legal liability to manage the risks associated with having tenants. Some insurers offer these as standard, but others offer them as optional cover - it's important to make your own enquiries.
Am I covered by Strata insurance?
If you are a property owner in a strata development, you may be covered by strata insurance as part of your strata agreement. Strata insurance generally only covers the building portion of your investment property – including things like shared utilities, indoor and outdoor areas, etc. It usually also covers the fixed parts of your rental property including floors and windows.
Make sure you understand what’s covered under your investment property’s strata.
Does landlord insurance cover my tenant’s belongings?
If you take out landlord contents insurance, it does NOT cover any of the contents owned by the tenant. They will need to get a contents only policy of their own. Find out more about contents insurance.
How much does landlord insurance cost?
Like with many other types of insurance, the cost of landlord insurance premiums depends on a wide range of factors. These include how much the property is rented for, what type of property it is, where it is located, its age, and what the insurance covers.
While insurance companies vary in how they calculate the cost of landlord insurance, the following is a list of the main factors involved:
Where the property is located
Landlord insurance premiums could cost more if your property is somewhere that’s susceptible to extreme weather events (like floods or bushfires), or if it’s in an area that’s high risk for crime.
What type of property it is
Because of the potentially higher rebuild cost, a landlord insurance policy for a house may cost more to insure than a unit.
The replacement cost of the building and contents
Landlord insurance companies will take into account what it would cost to replace contents like carpets and blinds, or repair or rebuild your building if it was damaged or destroyed.
The security features installed
Having safety features, like an alarm and/or window locks, could help reduce your landlord insurance premium cost.
A history of previous claims
Having a history of claims may influence the cost of your landlord insurance premium.
Don’t forget, some insurers charge extra to pay by the month rather than annually, so it’s important to check out the relevant product disclosure statement before you make a decision on the best landlord insurance for your situation.
What if you don’t get landlord insurance?
If an insured event like a natural disaster, such as a bushfire or flood, were to severely damage your investment property, without landlord insurance you would be out of pocket for the costs to repair or rebuild.
In addition, if you don’t have landlord insurance and your tenants or their guests cause damage to your investment property, you would be responsible for the associated rebuilding or replacement costs.
While tenants usually need to pay a bond when they sign a rental agreement, the amount of the bond - may not always cover all damages.
Similarly, if someone was to be injured or die at your investment property, as the property owner you could be up for significant legal liability costs too.
That’s why a landlord insurance policy could be a good idea for your investment property.
Need landlord insurance?
Explore coverage options for your investment property with Westpac Landlord Insurance, provided by Allianz. Get a landlord insurance policy quote today.
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Things you should know
Any financial product advice provided on this page is general in nature and does not take into account your personal circumstances. Before making a decision, please consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD). To see some of the events covered and not covered, please refer to the Key Facts Sheet (KFS).
1The Building and Contents calculators provided by Allianz through a third-party provider, are intended as a guide only. For a more accurate cost to rebuild your home or replace your contents, consider obtaining a professional valuation from a licensed builder or professional valuer.
Landlord Insurance is issued by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL 234708 (Allianz). Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (the Bank) arranges the initial issue of the insurance under a distribution agreement with Allianz but does not guarantee the insurance. Before making a decision, please consider the relevant Product Disclosure Statement.
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