Written byLandlord insurance is cover for a rental property owner, protecting against tenant related loss such as damage, theft and lost rent, plus legal liability.
Also known as: rental property insurance, investment property insurance
Key points
- It typically covers malicious or accidental damage by tenants, theft, and loss of rent when a tenant defaults or absconds.
- Legal liability cover responds if someone is injured at the property and you are found responsible.
- It is not building insurance: many owners hold both, or a combined policy that includes each.
- Strata owners usually need contents and landlord cover only, because the body corporate insures the building itself.
- Premiums are generally deductible against rental income, alongside depreciation claims on the property.
What landlord insurance covers
The core of a landlord policy is the tenant risk a standard home policy leaves out. That means deliberate or careless damage, theft by a tenant or their visitors, and rent you never receive because the tenant stopped paying, broke the lease or was evicted. Cover for legal costs in a tenancy dispute is common too.
Loss of rent cover is usually capped, expressed as a number of weeks rather than an open ended amount, and normally requires that the property was let through a proper agreement. The product disclosure statement sets out what proof is needed, which is one reason condition reports and written leases matter.
Landlord insurance and your investment loan
If you borrowed to buy the property, the lender's concern is the building. Investment home loan contracts almost always require building insurance for the replacement value, with the lender noted on the policy. Landlord cover is the layer you add on top, protecting the income rather than the structure.
Rent is what services the loan, so a tenant who stops paying is a cashflow problem before it is anything else. Investors often keep a buffer for vacancies as well. When you review the loan or look at refinancing, it is worth checking the policy still matches the property and the rent.
Example
An investor rents out a two bedroom unit in Adelaide through a property manager. Nine months in, the tenant stops paying and leaves after the tribunal order, taking the oven door and damaging two internal walls. The landlord policy covers the repairs above the excess and pays a capped number of weeks of lost rent while the unit is cleaned and re-let. The strata policy handles the common property. Without the landlord cover, the owner would have carried the repairs and the empty weeks while still meeting the loan repayments.
Not to be confused with
- Public liability insurance
- public liability is one part of a landlord policy, not the whole thing
- Mortgage
- a mortgage is the lender's charge over the property, landlord insurance covers the rent and tenant damage
Frequently asked questions
What does landlord insurance cover?
Tenant related losses that a normal home policy excludes: malicious or accidental damage by tenants, theft, and loss of rent when a tenant stops paying or leaves early. Most policies add legal liability cover and legal expenses for tenancy disputes. Building cover is separate unless you buy a combined policy.
Is landlord insurance tax deductible?
Premiums on a genuinely rented property are generally deductible against the rental income in the year you pay them. If the property is only rented part of the year, or you use it yourself, the claim is apportioned. Confirm your position with your accountant or check ATO guidance.
Do I need landlord insurance if I have building insurance?
They cover different things. Building insurance pays to repair the structure after fire, storm or similar events. Landlord insurance covers tenant damage, theft and lost rent, which building policies exclude. Many insurers sell a combined product, so check whether your existing policy already includes the landlord section.
Does landlord insurance cover unpaid rent?
Usually yes, up to a capped number of weeks and subject to conditions. Insurers generally require a written lease, a bond held correctly and evidence that you followed the tenancy process. Rent lost because the property simply sat vacant between tenants is not covered.
Is landlord insurance compulsory in Australia?
No law requires it. Your lender will require building insurance on a financed property, and strata schemes insure common property, but landlord cover itself is a choice. Most property managers recommend it because tenant damage and lost rent are the losses owners least expect.
Related terms
Broader term: Insurance
Insurance
Insurance is a contract where you pay a premium and an insurer covers specified losses, such as damage to a financed asset or a lender's loss on default.
Read definitionHome loan
A home loan is a secured loan used to buy property or fund major home projects, with the lender taking a mortgage over the property as security.
Read definitionLiability
A liability is a legal responsibility to pay money or answer for a loss; in accounting, a present obligation to transfer an economic resource, shown on the balance sheet.
Read definitionDepreciation
Depreciation is the fall in an asset's value over time, spread across the years the asset is used so the cost can be claimed as a tax deduction.
Read definitionProduct disclosure statement (PDS)
A product disclosure statement (PDS) is the document a product issuer must give a retail customer before they buy a financial product, setting out its features, risks, fees and costs.
Read definitionDefault
A default is a borrower's failure to meet the terms of a credit contract, usually by missing repayments, which lets the lender demand the balance and enforce its security.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.