What you need to know about landlord insurance cover

8-minute read

What you’ll learn

• Home Insurance vs Landlord Insurance
• Who pays for landlord insurance? The landlord or tenant? 
• What’s included in landlord insurance? 
• What doesn’t landlord insurance cover? 
• Does a landlord insurance protect me if I list my rental property on Airbnb?

1. Home insurance vs Landlord insurance

Home insurance and landlord insurance are designed for different purposes, depending on how you use your property.

Home Insurance usually covers:

• Properties that are owner-occupied.
• The building (with building insurance cover) and/or the owner's personal belongings (with contents insurance cover).

Landlord Insurance usually covers:

• Properties that are rented out to tenants.
• The building (with landlord building insurance cover) and other contents provided by the landlord (with landlord contents insurance cover) but not the tenant's personal belongings.
• Loss of rental income if the property becomes uninhabitable due to an insured event.
• Legal liability insurance to manage risks associated with having tenants.
• Additional issues specific to landlords like malicious damage and legal costs for tenant disputes.
   

Imagine your tenant defaults on their rental payments, causes malicious damage to your property, or your property is destroyed by a natural disaster. These scenarios could be insured events that you can choose to be covered by landlord insurance. Items like any furniture, appliances, light fittings or carpets you make available to tenants may also be covered.

Wouldn’t my strata levies already cover me?

If you own an apartment, townhouse or villa, the cost of some insurance premiums may be shared between the owners. An example of this is a strata arrangement where building insurance is arranged by the body corporate and payment of this is included in the levies. It is important to understand what this may cover and if you would want to take contents insurance for the things potentially not covered by strata insurance such as window coverings and wall mounted air conditioning units.

2. Who pays for landlord insurance? The landlord or tenant?

The cost of landlord insurance is typically the responsibility of the landlord, not the tenant. As a property owner, you should protect your investment, which includes the building itself and any furnishings or appliances you provide. Landlord insurance can also include optional cover for risks associated with renting out a property, like loss of rental income.
 

Landlord insurance is made up of one or both of the below policies:

• Building insurance which insures physical structures and fixtures (including things like your garage, fences, showers, baths, hot water systems and air conditioners) and/or
• Contents insurance which insures belongings you have made available at your rental property (like furniture, carpet, floating floors and appliances).
   

It’s important for tenants to understand that landlord insurance coverage doesn’t cover their personal belongings. Renters should consider renter’s insurance or a contents-only policy, to cover their personal property.

3. What’s included in landlord insurance?

As we've already discussed, landlord insurance is a specific type of property insurance designed to cover landlords for the unique risks associated with renting out their properties to tenants.
 

Here’s a list of what is commonly included in new landlord insurance policies:

Property Damage

Insurance will cover damage to your building, and some of your personal belongings within it, resulting from a variety of events such as fire, storm, or malicious damage by tenants. It will not cover pre-existing damage.

Liability cover

This offers cover if a tenant or a visitor sues you after being injured on your property. It typically includes compensation and legal costs.

Legal expenses

Some landlord insurance policies may cover the legal costs for certain types of disputes relating to your rental property.

Tenant-related risk

Some policies offer additional or optional coverage for risks specific to having tenants, like loss of rental income, malicious damage to your property by tenants and even cases of theft by tenants.
 

Other types of cover may be available as optional extras. These may include:

Loss of rental income

If your rental property becomes uninhabitable due to an insured event, your policy may cover the lost rental income you would have otherwise received from tenants.
 

Every home and landlord insurance policy is different, and each insurer offers various levels of coverage. Optional cover may also be available for things like accidental damage. Ensure you read the full details of  any cover you are considering by accessing the Product Disclosure Statement for that insurance policy. That way you can make sure it fits your needs.

4. What doesn’t landlord insurance cover?

Landlord insurance is generally quite comprehensive, but it doesn't cover every situation. Here are some common exclusions that you might encounter in a landlord insurance policy:
 

1. General Wear and Tear: The gradual deterioration of the property over time due to usage and age is not covered. This includes things like fading paint, worn-out carpets, or old appliances breaking down.
2. Maintenance Issues: Problems that arise due to lack of maintenance or neglect are typically not covered. This could include mould, rot, or pest infestation resulting from deferred maintenance.
3. Intentional Damage by the Landlord: Any damage you cause on purpose to your property won’t be covered by your insurance.
4. Certain Natural Disasters: While many natural events are covered, some policies may exclude specific disasters such as earthquakes, floods, or landslides unless you have added extra coverage for these events.
5. Unoccupied Property: If your property is left vacant for an extended period, usually more than 30-60 days (the period can vary by policy), there may be limitations to your coverage. Some policies may not cover incidents occurring during this time unless you have informed the insurer.
6. Loss of Rent Due to Market Conditions: If you're unable to find a tenant due to high vacancy rates or other market conditions, your loss of rental income typically won't be covered.
7. Tenant Belongings: The tenant's personal belongings are not covered by landlord contents cover. Tenants need their own contents insurance to cover their possessions.
8. Specific Pets and Animal Damage: General landlord contents policies might exclude damage being caused by tenants' pets. Always check the policy details.
9. Illegal Activities: Damage from illegal activities or production of banned substances on the property will usually not be covered.
    

It's vital for landlords to make their own enquiries and read the Product Disclosure Statement so they understand the specific exclusions of any policy they are considering. 

5. Does a landlord insurance policy cover me if I list my property for short-term or holiday rental?

Traditional landlord insurance is typically designed for long-term leases. The increased risks associated with short-term rentals, such as higher guest turnover and the potential for property damage, are not always included.
 

Here’s what you should consider if you’re considering renting out your property for short-term use or holidays:

Policy terms

Review your existing landlord insurance policy to see if it mentions or excludes short-term rentals. Some policies may offer coverage but with conditions, such as requiring you to inform the insurer of the property's use as a short-term rental.

Host guarantees

Some services, such as Airbnb, can provide a ‘Host Guarantee’, which may offer some protection for damages. However, it’s important to note that this is not a replacement for landlord insurance. Plus, limitations and exclusions apply so make sure you review the terms. 

Short-term rental insurance

Some insurers offer specific policies or endorsements for short-term rentals that cover periods when the property is rented out through services such as Airbnb.

Notification of Insurer

If you’re considering renting your property through a short-term rental service (such as Airbnb), it’s essential to notify your insurer. Failure to do so might result in denial of claims if they arise.

Regulations and Local Laws

Check local laws and regulations regarding short-term rentals, as some areas have specific requirements for insurance cover.
 

To ensure your property is covered while renting it out for short-term use, you may need to switch to a policy specifically tailored to short-term rentals, if available. Always discuss your specific situation with your insurance provider to make sure you have the appropriate coverage.