GUIDES & RESOURCES

What Does Landlord Insurance Cover?

As a landlord, you have a vested interest in your property. You’re relying on it to create a rental income – and if you have a mortgage on your property, you want to think about how you can cover payments if there’s no rent coming in.
What does landlord insurance cover

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With all the different types of insurance policies out there, it’s not always obvious which insurance covers what. There’s contents insurance, building insurance, landlord insurance – and they all cover different things.

Renting your property out to a third party involves risks – essentially, you’re handing it into someone else’s care. Unfortunately, you can’t always trust that care and events happen which are outside of your control.

This is where landlord insurance comes in – it protects you financially against some of the risks that come with renting your property out.

Landlord insurance – what’s typically included?

Every policy is different, it’s about shopping around, reading the fine print and securing suitable cover for your needs.

A standard landlord insurance policy

If you want to keep your costs low, you may opt for one of the more ‘basic’ policies, which cover the most common risks. Keep in mind, you may have specialised or unusual requirements that aren’t included.

What’s typically included under a standard landlord insurance policy?

  • Theft or burglary by tenants (or their guests)
  • Damage to building or permanent fittings and fixtures caused by tenants (or their guests). Fittings and fixtures may include items like curtains, blinds, carpets, hot water systems, light fittings, built-in air-conditioners and heaters, built-in cabinetry, doors, walls and windows, fencing, paths, driveways, in-ground swimming pools, rainwater tanks, solar panels and floor tiles
  • Loss of rent due to a tenant defaulting on rental payments. Sometimes, even the most reliable tenants struggle to make payments (and in special circumstances of illness or injury, the court may award tenants a release from their obligation to pay rent)
  • Legal expenses associated with tenant disputes
  • Damage to permanent fittings and fixtures caused by perils such as flood or fire
  • Loss of rent if property becomes uninhabitable due to repairs from an insured event

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Extras not necessarily covered under a standard policy

While a standard landlord insurance policy may be on the cheaper side, will it provide the cover you need? For example, some standard insurance policies may not include damage caused by floods or natural disasters prone to the area, or there may be restrictions that limit the amount you can receive under a claim.

And if you experience a loss of rent for a prolonged period, it can have a huge financial impact.

There are a few other things you might want to weigh up when researching policies:

  • Are there limits on the amount you can claim back for missed rental payments?
  • Does the policy cover malicious damage caused by tenants or their guests? (Some policies only cover accidental damage)
  • Does the policy include damage caused by pets? (In Victoria, tenants now have a legal right to bring their pets1)
    Is there public liability insurance in the event someone gets injured while visiting your property?
  • Are you covered for loss of rent if your property becomes uninhabitable due to flood or fire damage?
  • In the case of storm damage, does the policy cover removal of debris?
  • Will you get reimbursed for re-letting expenses after a claim on rental loss?
  • If your tenant fails to return the keys, are you covered for ‘change of lock’ expenses?
  • Are you covered for professional tax audit fees in the event you are audited?

Specialised requirements

Sometimes you may have specialised requirements because of the location of your property or unusual circumstances not covered under many policies.

Such cases may include:

  • Strata title insurance if your property is on a strata title. This is a specialised insurance that covers damage to common property and theft or damage to contents managed by an Owners Corporation
  • Contents insurance if you intend to rent your property out furnished (landlord insurance only covers permanent fittings and fixtures, not items such as sofas, TVs etc)
  • Short-term rental insurance if you’re letting your property out for short lets or holiday lets

Ready to find a suitable home & contents policy?

As with most insurance products, there are a variety of different landlord insurance policies on the market. It’s tempting to take out the cheapest policy to keep your costs low, but remember landlord insurance may be a tax-deductible expense2, so paying that little bit more to get full coverage and the level of protection you need could be justifiable.

Click here to view iSelect’s range of home & contents providers, and select the one which suits you.

Sources:
1. https://www.vic.gov.au/rentfair/pets-are-welcome.html
2. https://www.ato.gov.au/general/property/residential-rental-properties/expenses-deductible-immediately---management,-maintenance,-interest/

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