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Landlord Insurance – what is it worth to you?
By: Vincent Ruan
November 19, 2021

Whether you are renting out your family home or an investment property – the fact is that you will want to protect the financial investment that you have worked long and hard for.

Renting your property to Tenants is a great way to get a return on your investment and increase your income.  However, it doesn't come without risk – and like any business risk, it is wise to take steps to minimise that risk and protect your asset.  Landlord insurance is all about giving you peace of mind and protecting your investment.  It can compensate you for accidental and/or malicious damage caused by Tenants or their guests  and damage to any inclusions that form part of the Tenancy Agreement.  Some Landlord insurance policies will also protect you from rent defaults, storm damage and even theft.  The key is to compare the options and remember that cheapest is rarely best when it comes to insurance.

Landlord insurance does not relieve you of your obligation to ensure that the property is well-maintained and habitable – it is there to protect you against bad Tenants.  Home and Contents insurance will generally cover damage to the building and some fixtures and fittings, but not against Tenants who do not care about your property. Landlord insurance may also cover you for loss of rent due to unforeseen circumstances such as when there is damage to the property caused by a severe storm.

Apart from damage and theft, Landlord insurance can also cover you for any legal expenses that you need to incur against a Tenant or liability if a Tenant makes a claim against you.  Whilst this protection comes at a cost, it is feasible that the fees paid on your insurance may be tax deductible and this will be worth checking with your financial advisor.

With the increase of drug labs in residential properties, some Landlord Insurance will also cover you for the required clean-up required prior to a Tenancy if the property has been used for this purpose.  Remedial clean-ups of drug labs can run into thousands of dollars.

Increasingly, Tenant hardship is becoming an issue as we see a change to economic conditions – particularly in some areas that rely on industries that are being adversely effected.  Landlord insurance may protect you from loss of rent due to Tenant hardship when a Tribunal or court allows your Tenant to release themselves from the Tenancy Agreement due to hardship.

Rent defaults can also occur where the Tenant dies or where the Tenant has been evicted.  Not all policies cover all scenarios, so it is important to do your homework and select the policy that provides you the greatest cover.  It is also worth comparing what you are covered for – some policies will cover you only after 4 weeks of lost rent and some will have a limit to the time period you can claim – anything from 12 weeks to 12 months. 

In some cases Landlord insurance may also help reimburse the cost of lock changes where a Tenant has absconded without returning the property keys.

Making sure you have the right level of cover is critical and it is always better to be over-insured than under-insured.  Do your homework and evaluate the differences between your insurance options.  Saving a few hundred dollars on your insurance might sound like a bargain until you are faced with having to do a major renovation as a result of a Tenant damaging your property. 

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Written by
Vincent Ruan
As a property investor himself, Vincent's passion for real estate began more than 10 years ago, and his focus on professional...