Whether you’re purchasing your first property or you’re fifth, wrapping your head around all the relevant kinds of insurance isn’t easy. To make things a little bit easier, we’ve created this comprehensive guide to landlord insurance.

We’ve covered the key information Australian property owners need to understand landlord insurance and how it affects them.

What Is Landlord Insurance?

Landlord insurance is a particular kind of insurance that applies when a property is rented out to a tenant. This is in contrast to home insurance, which generally covers properties that are occupied by their owner. 

Why Is Landlord Insurance Important?

Landlord insurance is a crucial piece of financial cover for tenanted properties. For many Australians, a property is their most important financial investment.

 It can cover landlords in the following areas: 

• Property damage: Landlord insurance covers damage to your building as well as some personal belongings within it. You can cover damage caused by events like fire, storm or malicious damage by tenants.
• Liability cover: Landlord insurance can also cover you if a tenant or visitor sues after being injured 
• Legal expenses: Landlord insurance can also cover other legal expenses that may arise with regard to rental property disputes. 
• Tenant-related risks: Owning a tenanted property can present specific financial risks which are covered under some landlord insurance policies. This can include a loss of rental income, malicious damage to your property by tenants and theft by tenants.
• Loss of rental income: If an event occurs for which you are insured, and your property becomes uninhabitable, you can receive coverage for the rental income you have lost.

These various kinds of financial coverage can be extremely significant in that unforeseen circumstance like a fire or a legal dispute. That’s why landlord insurance is so important for Australian property owners. 

It’s critically important to carefully research landlord insurance policies before making a decision. Understand your specific circumstances and what exactly you will be covered for (for more information, check out Westpac’s comprehensive guide to landlord insurance).

Landlord insurance is not a legal requirement in Australia. However, in some cases it may be a required condition of your mortgage.

What Doesn’t Landlord Insurance Cover?

Just as it’s important to know what landlord insurance covers, you also need to be aware of what it doesn’t cover. Some areas that many landlord insurance policies do not cover are:

• General wear and tear: This refers to the gradual deterioration of a property over time, including things like fading paint and worn-our carpet.
• Maintenance issues: Failing to properly maintain your property can result in significant damage, but this category of damage is generally not covered in landlord insurance policies. That’s why it’s important to conduct proper maintenance on your property to avoid serious damage being caused by things like mold or pest infestations.
• Intentional damage by the landlord: Any damage caused to your property by you on purpose will not be covered by landlord insurance. 
• Certain natural disasters: Natural disasters are not always covered by landlord insurance policies. Some natural disasters that may be excluded in your landlord insurance policy are earthquakes, floods and landslides.
• Unoccupied property: Since landlord insurance is specific to tenanted properties, a property being left vacant for an extended period will affect your coverage. This period is usually more than 30-60 days.
• Market conditions: Loss of rental income due to factors like high vacancy rates typically isn’t covered by landlord insurance policies.
• Tenant belongings: The personal belongings of your tenants will not be covered by landlord insurance.
• Specific pets and animal damage: Landlord insurance policies may exclude coverage for damage done by pets.
• Illegal activities: Usually, damage that results from illegal activity, such as the production of banned substances, will not be covered under the policy.

Additionally, it’s important to remember that landlord insurance is designed for long-term leases. Risks associated with short-term rentals, such as those facilitated by services like Airbnb, are typically not covered by these policies.

How to Choose the Right Landlord Insurance for You

Now that you understand landlord insurance policies, here are 3 tips to help you choose the right landlord insurance:

1. Assess Your Needs

Before you begin the process of finding landlord insurance, it’s important to consider the particular needs of your property. For example, if your property is in a flood-prone area, you should strongly consider getting a policy that includes flood cover.

The type of property you’re covering will also impact the type of coverage you need. For example, if you own an apartment or townhouse, your strata arrangement can affect your landlord insurance. 

In these cases, certain insurance premiums may be shared between the property owners. Make sure you understand what is already covered under your strata arrangement, and what you are responsible for.

2. Research Policies

Once you know what you’re looking for, it’s time to find the perfect policy for you. In the Internet age, it’s pretty easy to find the information you need to understand various policies on the market.

Insurers will have their policies available for you to examine on their website. Usually, they’ll also offer beginner-friendly “explainer” style content to help you understand their policies, too.

Never settle for the first landlord insurance policy you come across. You can use comparison websites to help better your understanding of various policies or forum websites to find out more about other people’s experiences.

3. Review the Fine Details

When reviewing policies, and especially when you think you’ve settled on the right one, it’s time to delve into the fine details. Some of the most important things to check are:

• Exclusions: Make sure you know what your policy doesn’t cover you for, like wear and tear and certain natural disasters.
• Coverage limits: Find out how much your insurer will pay out for certain events. Ensure it aligns with your financial needs.
• Excess and premiums: Take plenty of time to ensure you find the right balance between excess fees and premiums for your insurance policy.
• Policy conditions: Find out what conditions you need to meet to maintain your coverage. This might include regular maintenance or security measures on your property.

Keep these tips in mind to give yourself the best possible chance to find the right landlord insurance policy for you.