Landlord insurance is a specific type of insurance policy designed to protect investment properties from the risks associated with tenancy and renting. It generally covers events that could cause a loss of income from your property, like rent default, damage to the property or theft.
While many providers offer landlord insurance, they generally all have three key components: building damage, which covers damage to fixed or structural aspects of the home, contents insurance, which covers things like appliances or blinds, and a section that protects against a loss of rental income.
Landlord insurance policies share some similarities with standard home insurance policies, like covering against storm damage but include additional features to protect tenant-specific risks.
Most things that can cause damage to a rental property or risk rental income are covered by landlord insurance. However, it is always important to check what isn’t included in the policy. Common exclusions can be general wear and tear, damage by insects or rodents, parts of the property you don’t rent out (external buildings or rooms), and many don’t cover pets’ damage.
Whether landlord insurance is a necessity or not, it is the age-old question when it comes to insurance: paying the premium and being protected or going without and risk incurring significant financial costs.
Some property owners feel that their building insurance may be enough. Still, some of the specific risks that come with tenants aren’t covered by standard building insurance and warrant the consideration of a specific landlord insurance policy.
The cost of landlord insurance should be measured against the risk of costs incurred by damage. According to the Insurance Council of Australia, in 2018 there were 30,000 claims for water damage alone, each with a hefty bill. Similar research indicated that just over one-third of landlord insurance claims are for storm or flood damage, while tenant defaults and theft by tenants made up almost another third of claims.
It is also worth noting that landlord insurance can be tax-deductible, so it’s worth speaking with an accountant to calculate the overall cost.