Landlord Insurance: What It Covers and Why Every Investor Needs It
Standard building insurance doesn't cover tenant-related risks. Here's why landlord insurance is essential — and how to choose the right policy.
If you own an investment property, you need landlord insurance. It's that simple. Standard building insurance covers the structure of your property against events like fire, storm, and flood — but it doesn't cover the risks specific to renting: tenant damage, loss of rent, liability claims, and legal costs. Landlord insurance fills that gap.
What Landlord Insurance Typically Covers
Covers intentional damage caused by tenants beyond normal wear and tear. This is one of the most common claims.
Covers lost rental income if the property becomes uninhabitable due to an insured event, or if a tenant defaults on rent.
Covers legal costs and compensation if a tenant or visitor is injured at the property and you're found liable.
Covers theft of fixtures and fittings by tenants (e.g., appliances, light fittings, curtains).
Covers costs associated with pursuing tenants through tribunals or courts for unpaid rent or damage.
Covers your furniture and contents if you're renting the property furnished.
What It Typically Doesn't Cover
- ✕Normal wear and tear: Gradual deterioration from everyday use is not covered — that's expected and should be budgeted for.
- ✕Pre-existing damage: Damage that existed before the policy started won't be covered.
- ✕Damage from lack of maintenance: If damage results from your failure to maintain the property, it may not be covered.
- ✕Vacant property periods: Most policies have limits on how long a property can be vacant (typically 60–90 days).
- ✕Certain natural disasters: Flood and earthquake cover may need to be added separately depending on the insurer.
How Much Does It Cost?
Landlord insurance typically costs between $1,000 and $2,500 per year for a standard residential investment property. The exact cost depends on the property value, location, coverage level, and excess amount.
At $1,500/year, landlord insurance costs less than $30/week. A single tenant damage claim can easily exceed $10,000–$20,000. Loss of rent for 8 weeks on a $600/week property costs $4,800. The insurance pays for itself the moment you need it — and the premium is fully tax deductible.
How to Choose the Right Policy
The cheapest policy may exclude key coverages. Compare what's included in each policy, not just the premium.
How many weeks of lost rent is covered? What's the waiting period? Does it cover tenant default or only insured events?
A lower excess means higher premiums but less out-of-pocket when you claim. Choose based on your cash buffer.
The Product Disclosure Statement contains the full terms. Read the exclusions section carefully before committing.
Quick FAQ
No. Building insurance covers the physical structure against events like fire and storm. Landlord insurance covers tenant-related risks like damage, loss of rent, and liability. Most investors need both.
Yes. Landlord insurance premiums are fully tax deductible as a property investment expense.
Yes. Even the best property manager and tenant screening process can't eliminate all risk. Landlord insurance is your financial safety net for the unexpected.
Disclaimer: This article is for educational purposes only and does not constitute insurance advice. Always read the Product Disclosure Statement and seek professional advice before purchasing insurance.
Module 5 covers insurance, property management, tenant screening, and maximising returns.