What Is Landlord Insurance and Why Is It Important?

Key Takeaways

Landlord insurance provides essential peace of mind for property owners, safeguarding against risks like tenant damage, loss of rental income, and unforeseen events. 

• Landlord insurance covers all types of investment properties including houses, apartments, and units.
• Most policies include a combination of landlord insurance, contents insurance, and building insurance – ensuring comprehensive protection.
• While not legally required, landlord insurance offers invaluable peace of mind and financial security for property owners.
• Premiums for landlord insurance may be tax-deductible. 
• Comparing policies will help you find the best landlord insurance for your needs.

If you own a rental property, you may need different insurance cover than traditional home and contents policies. 

Landlord insurance is invaluable if you are renting out your property. Without it, you may run the risk of being liable for any damage caused by tenants. Good landlord insurance will minimize this risk and make your job as a landlord easier, saving you valuable time and money.

This blog will address landlord insurance, including what landlord insurance is, what it covers, and why you might need it to protect your property and its assets.

What is landlord insurance?

Landlord insurance is a type of insurance policy specifically designed to protect those who own investment properties. Landlord insurance covers any event that may affect investment such as theft, storm damage, or tenants not being able to pay their rent.

Landlord insurance is offered by most general insurance providers in Australia and can apply to all types of investment properties including a house, apartment, unit, or townhouse. Most landlord insurance policies include a combination of landlord insurance, building insurance, and contents insurance to cover the costs of loss of rental income, property damage, and damage to what is inside the property.

What does landlord insurance cover?

A landlord insurance policy may cover some or all of the following:

Tenancy cover

• Damage or theft by tenants or their guests
• Loss of rental income
• Rent default
• Legal expenses in the event that you have to take tenants to court
• Liability

Building cover

Building cover will protect against damage to the building structure (including pipes, cables, external awnings, external structures, gas and plumbing, and fixtures and fittings in the event of:

• Fire
• Lightning strikes
• Storm damage
• Flooding
• Tree falls
• Earthquakes
• Explosions
• Vandalism
• Impact damage (if a car crashes into the home or in the event of a break-in)
• Water damage

Contents cover

If you are renting out a furnished home, additional contents insurance can protect you against theft or damage to the contents of your home such as appliances, furniture, carpets, curtains, and light fittings in the event of:

• Fire
• Lightning strikes
• Storm damage
• Flooding
• Tree falls
• Earthquakes
• Explosions
• Vandalism
• Impact damage (if a car crashes into the home or in the event of a break-in)
• Water damage
  
  

You may be able to choose the excess you pay and add on additional extras including cover for when appliances stop working, civil unrest & rioting, and accidental damage.

What is not covered by landlord insurance?

Landlord insurance is a great precaution for anyone who is renting/leasing out their property. However, there are some things that landlord insurance does not cover. These include:

• Tenant repairs (handiwork carried out by tenants that result in damage to property structure or contents)
• General wear and tear (including mould damage or peeling paint)
• Building defects
• Tenant contents
• Market conditions
• Run-of-the-mill expenses (such as payment for lawn mowing service or a plumber’s bill for unblocking a clogged pipe)

Do you need landlord insurance?

There is no legal requirement for landlords to have landlord insurance, but it is worth investing in even just for peace of mind. Accidents do happen, and if your property is damaged or if a tenant is injured while staying on your property, you could be up for thousands of dollars in liability claims and damage repair costs.

As a landlord, there is also a very real risk of a tenant defaulting on their rental payments. Changes to life circumstances or financial difficulty during economic downturns can result in loss of rental income which can affect your financial standings. Having landlord insurance will help cover these periods of income loss so that you do not have to.

Even reliable tenants make mistakes. Having landlord insurance minimises risk for everyone and saves any emotional and financial stress during a tenancy. 

Is landlord insurance worth it?

Landlord insurance is a very sensible investment if you are a property owner. One of the most significant benefits of landlord insurance is, of course, peace of mind. Most tenants are sincere and want to do the right thing. However, accidents happen.

Whether it is a natural disaster or even a harmless game of backyard cricket, damage to your property is a possibility. Too often, uninsured landlords are left with huge bills and even legal settlements that can result in a loss of time and income which can be emotionally taxing. Landlord insurance acts as a safety net, protecting you, your property and your tenants.

In addition, your insurance premium may be tax-deductible so that you may be able to get your money back. 

If you do decide to take out landlord insurance, be aware there are several policies available and not all are the same. For this reason, make sure to take some time comparing landlord insurance policies before signing up. 

How to find the best landlord insurance

The best landlord insurance for your investment property depends on your circumstances and what you need the policy to cover. Here are some things to consider:

Determine what coverage is most important to you as a property owner. For instance, you might focus on insuring your property against possible damage by a tenant or safeguarding against loss of rental income. If your property is in a disaster-prone area, you may want a policy that covers events like bushfires or flooding. 

Use online comparison tools that allow you to compare landlord insurance providers and policies. Take the time to assess the provider’s reputation by reviewing their customer feedback, value for money, and the scope of coverage that is offered.

Once you have narrowed down your selection, carefully compare the PDS to your needs as a property owner. Pay close attention to coverage inclusions, exclusions, claim limits, and any extras or discounts offered. 

The best landlord insurance isn’t just about the coverage offered, it’s also about how well the provider handles the claims process when the unexpected occurs.

Check the provider’s website to get an idea of the claims handling process, and take some time to review customer feedback to gauge their satisfaction with the provider’s responsiveness and efficiency in managing claims. 

Is landlord insurance tax deductible?

Yes. According to the Australian Taxation Office (ATO), any expenses related to the management and maintenance of an investment property are generally eligible for a tax deduction. This also includes your landlord insurance premiums. 

When claiming a tax deduction for landlord insurance, the property must be rented or genuinely available for rent. Ensure you keep accurate records of your expenses to support your claims.

To ensure compliance and learn more about tax-deductible expenses, seek professional advice from your tax advisor.

Learn more about property management with LJ Hooker

Landlord insurance is a handy thing to have for property owners and investors. You have dedicated a lot of time and money to your property and, therefore, want to be confident that it is protected.

At LJ Hooker, our team can guide you through all the property management essentials, from investing to finding the best tenants and managing your property. Find a property manager today to get started.

DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.