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What is landlord insurance?

Landlord insurance covers several must-haves for investment property owners that are not covered by other types of home and contents insurance policies:

  • Theft or burglary by tenants or their guests
  • Malicious damage or vandalism by tenants or their guests
  • Loss of rent due to tenant default
  • Legal expenses required to evict a tenant

A good quality landlord insurance policy protects you against a number of things that other home and contents insurance policies do not cover. And the good news is that because it is an investment expense, your policy premium is tax deductible.

There are also policies available to cover short-term rental landlords who use sites like Airbnb, Stayz and Flatmates.com.au to rent out a room in their own home, or a granny flat attached to their property. If home owners aren’t covered and a renter or guest damages their property, they can face paying for expensive repairs on their own. Even worse, they could face expensive public liability claims if a renter is injured while staying on their property – which could amount to hundreds of thousands of dollars.

There are a few different options for short-term rental landlord insurance, including Airbnb’s Host Protection Insurance program, and ShareCover home and contents policies for short-term rentals available from IAG and NRMA.

What to look for in a landlord insurance policy

There are a few things it is crucial to check when purchasing landlord insurance – the terms and conditions, what is and isn’t covered, and the excess that applies if you make a claim. These elements are often very different from policy to policy, so shopping around on the CANSTAR website and reading the product disclosure statements (PDS) for each policy is important.

Cost of landlord insurance

Price is obviously important because you don’t want your insurance premiums taking a large slice from your rental income. There is a wide range in what you can pay for landlord insurance, so it pays to shop around.

Having said that, you often get what you pay for so you shouldn’t assume that the cheapest insurance policy will provide the best value for money. You can avoid being caught out with a nasty surprise at claim time by looking carefully at both the price and what the provider is willing to cover.

Thankfully, landlord insurance is not prohibitively expensive. For example, our 2016 star ratings have found that those renting out a Sydney unit were only paying 1.5% of their rental income on insurance.

The cost of landlord insurance varies between the states and territories, and also varies by the risk associated with your property’s postcode. Insurers base their prices on factors such as the risk of rental default in an area, the risk of damage by tenants in an area, and the risk of natural disaster in an area.

Inclusions and exclusions of landlord insurance

Beyond the essential inclusions, there are plenty of other features and inclusions you can look for in a policy. CANSTAR researches and rates policies for the following features and inclusions:

  • Does the policy have a weekly rent limit?
  • Accidental damage or damage caused by natural disasters and storms
  • Theft or burglary caused by tenant
  • Malicious damage caused by tenant to building and/or contents
  • Damage caused by tenant’s pet
  • Public liability cover for injury to someone visiting your investment property
  • Rent loss due to insured events, prevention of access, rental default by tenant, death of sole tenant, damage caused by tenant, theft by tenant, tenants obtaining a financial hardship order, absconding tenants, tenant’s failure to give vacant possession, or tenant eviction by court order
  • Re-letting expenses after a claim on rental loss
  • Removal of tenant’s goods after a claim on rental loss
  • Change of locks after a claim on rental loss
  • Legal costs such as representation fees, related to tenant eviction by court order or claim for rental loss
  • Cover for professional tax audit fees

A summary of other features considered by CANSTAR is contained in the Methodology attached to the Landlord Insurance Star Ratings report.

Things to consider when getting landlord insurance

What you should look for in a landlord insurance policy depends on working out what insurance needs are important to you. Before you start looking, ask yourself the following questions, among others.

What level of insurance do you want? Building only or home and contents? Will you rent your property furnished or unfurnished?

If you rent out a furnished property, it would cost a lot to replace the lot if it was damaged, so contents insurance is a must. Landlords who rent out an unfurnished property might think home insurance for the building only will be enough to cover the property. However, building only insurance doesn’t cover the contents, including carpets or other fittings you might have at a property. Considering how many cyclones and storms tear through Australia every year, you could end up paying for it if you chose building only insurance.

Will you let your tenants keep pets on the property?

From clawing the curtains to having an accident on the carpet, pets can do a lot of damage to the fittings of a property. Some policies cover damage caused by pets, but some do not – so it’s very important to read the whole PDS of a policy before signing up. If you’re covered, you might be perfectly happy to let Fido or Fluffy live with your tenant.

Are there any specific risks (e.g. flood or bushfire) your property needs to have covered?

As many property owners know, flooding can be a major issue when it comes to choosing a place to buy or a place to rent. A river view doesn’t always equal dream house.

How can you check if your investment property is in a flood zone? You should check your state government’s flood maps for your area, or your local council’s planning maps online. In general, properties near rivers or in low-lying areas are particularly prone to flooding.

Does the policy cover accidental damage or malicious damage, or just theft?

You might have wonderful tenants – but what about their friends or other guests who visit them? Hopefully you’d never need your optional extras cover for accidental breakages and malicious damage or vandalism, but if something did happen, it’s priceless knowing you’re covered.

Where is the property located?

The location of a property will affect how much the premiums cost to insure it. Not surprisingly, landlords in cyclone-ridden North Queensland pay the most to insure their properties, with Canstar calculating average premiums, as per the policies assessed for Canstar’s 2015 Landlord Insurance Star Ratings, amounting to 15% of their rental income. Meanwhile, landlords in Sydney pay just 1.38% of their rental income in insurance. Tasmania and Adelaide have the cheapest average premiums for both houses and units. (Figures current at June 2015.)

Landlord insurance glossary of terms

Please note that these are a general explanation of the meaning of terms used in relation to landlord insurance policy cover. Your insurance provider may use different wording and you should read the terms and conditions of your insurance policy carefully to understand what you are covered for. Refer to the product disclosure statement from your provider.

Accidental damage: Damage caused by an event or incident that you and your tenant did not intend or expect.

Bond: Money paid by a tenant and held as security by the landlord against any possible future property damage, outstanding rent or other costs.

Building replacement value: The amount it would cost you to totally rebuild the property at today?s prices, taking into account any renovations or improvements you have made previously to increase the property’s value.

Certificate of insurance: The Certificate of Insurance is given to you by your insurer for each period of insurance. This important document shows the cover you have chosen and other policy details, and verifies that you have insurance with the provider.

Duty of care: Because insurance is a contract between landlord and insurer, landlords have a duty of care to take all reasonable care to prevent theft, loss, damage, or legal liability. Landlords also have a duty of care to follow all terms and responsibilities set out in the insurance contract.

Duty of disclosure: Landlords have a duty of disclosure to be honest and tell their insurer everything they know or should know, if a reasonable person would consider it relevant to the insurer’s decision to insure someone under the policy. Disclosed information can affect whether or not the provider will insure a landlord, the cost of the premium, and any special conditions that might apply to the policy. A failure to disclose information could result in a claim being reduced or refused, or your policy being cancelled entirely.

Excess: The amount you have to pay for each incident when you make a claim. The amount and type of excess that applies to different types of claims under your policy will be shown on your Certificate of Insurance. You may be able to pay a lower premium if you have a higher excess, but you need to be sure that you could afford to pay the excess if you had to.

Exclusions: Anything not covered by your policy. Exclusions vary between insurance providers.

Fixtures and fittings: Household items or equipment that are permanently attached to the building, such as carpets, curtains, and air-conditioners.

Flood cover: The standard definition of a flood has been updated after the 2011 floods in Brisbane and is now as follows:

“When normally dry land is covered by water that has escaped or been released from the normal confines of:

  • any lake, river, creek, or other natural watercourse, whether or not it has been altered or modified; or
  • any reservoir, canal, or dam.”

This does not cover damage caused by the sea, such as a tsunami. If you have concerns about flood cover or other cover, check with your insurance provider.

Forced entry: Unlawful entry into your investment property, including picking locks or using stolen keys. It does not include someone opening an unlocked door or window.

Fusion: The burning out of an electric motor or its wiring, caused by the electric current in it. Common items that might be claimed under fusion cover include washing machines, clothes dryers, refrigerators, and pool filters.

Inclusions: Anything covered by your policy. When a particular event is listed as being included in your policy, the insurer will cover the whole expense or a listed percentage of the cost involved in repairing the damage or replacing damaged items. Excesses may apply to claims.

New for old replacement: A type of cover where if your home or contents are damaged or stolen, your insurer will replace them with new items or repair them with new materials. Many new for old features specify that you can only claim new for old replacement for an item if it is younger than a certain number of years.

Optional cover: This is extra insurance cover above that included in the standard or basic policy. You can ask your insurer to add optional cover to your policy for a higher premium. Common examples of optional cover include accidental glass breakage, or storm damage to gates and fences. Read your PDS to see which optional covers may be available for your policy.

Overdue instalments: If your insurance premium is overdue to be paid, your insurer may refuse to pay a claim and/or cancel your landlord insurance policy without further notification.

Period of insurance: The time you are covered by the insurance, as shown on your Certificate of Insurance.

Policy: Your insurance contract. It consists of a product disclosure statement (PDS) and your latest Certificate of Insurance.

Premium: The amount you pay your provider for your insurance policy. Includes any compulsory government charges or taxes such as stamp duty and GST, and the Fire Services Levy (FSL) if applicable. Your premium must be paid on time for your property to be covered.

Product Disclosure Statement (PDS): The document that contains the terms and conditions of your insurance cover. It tells you what cover is provided, what exclusions apply, premiums and other fees and charges, and any other important information. Your provider will supply you with a new PDS if there are any changes made to the terms and conditions of your insurance product.

Sum insured: Stands for the sum you are insured for. This is the maximum amount you can claim for a particular incident.

Unit: A ‘home unit’ dwelling in the form of an apartment, flat, villa, or townhouse, subdivided according to state or territory laws for strata title.

Unoccupied excess: An insurance provider may charge an additional excess for a claim for a covered incident if your property remained continuously unoccupied for a certain length of time.

Who offers landlord insurance in Australia?

If you’re trying to make your own shortlist of products that might suit your needs, you can’t go past the 5-star rated products in our 2015 Star Ratings Report. CANSTAR researches and rates landlord insurance policies, comparing more than 2,600 quotes across seven different regions, and assessing more than 100 different features within 16 categories. Please check any discounts or special offers mentioned below on the website of the relevant provider as information is only correct at time of writing (September 2015).

  1. 1Cover Direct Insurance – 1Cover offers insurance for your home, car, and travel. Features include automatic sum-insured adjustment at renewal and fire and explosives cover. They provide cover to over 1 million Aussies and counting.
  2. AAMI – AAMI won the CANSTAR national award for landlord insurance in 2014. “Lucky you’re with AAMI.” They have a fast online claims process and you can them 24/7 online or via email, Facebook or Twitter. At the time of writing, they offer a $25 discount for buying a policy online. They offer landlord, home, car, life and income, travel, and business insurance. Founded in 1969, AAMI is one of Australia’s oldest and largest insurance providers.
  3. Allianz – Allianz won the CANSTAR state awards for Queensland and South Australia for landlord insurance in 2016. At the time of writing they offer a 10% discount for buying online. They offer landlord, home, life, pet, travel, car, boat, and business insurance, and some unique insurance offerings including aircraft, marine, and workers’ compensation. Allianz was born in 1914 as The Manufacturers’ Mutual Accident Insurance Association but you would probably know them from their “Aaaaallianz Insurance” TV ads.
  4. ANZ – ANZ, at time of writing, offers a 15% discount for loyalty in keeping multiple policies with them over time. They provide new for old contents replacement, regardless of the age of items. They offer landlord, home and contents, car, life, income, travel, and loan repayment protection insurance. ANZ has a long history, founded in 1835 in Sydney as the Bank of Australasia.
  5. Aon – At the time of writing, Aon offers a 20% discount for buying a landlord policy online. They provide new for old cover for most contents up to 15 years old. They offer landlord, home and contents, car, boat, caravan, and travel insurance. Aon chose their name – a Gaelic word meaning “Oneness” – in 1982 following a significant merger.
  6. Apia – Apia Landlord Insurance is designed specifically for people aged 50 years or older. They allow customers to pay by the month at no extra cost. At the time of writing, they offer a 15% discount for buying online. They offer insurance for landlord, home and contents, apartment, retirement village, health, injury, funeral, assisted living, car, caravan, boat, and travel. Apia is also the capital of Samoa.
  7. Australian Unity Insurance – Australian Unity offers a 10% discount for buying online, an additional 10% off for having a security alarm system installed, 10% off for having a sprinkler installed, and 10% off for being a health insurance member. They offer landlord, home and contents, health, life, car, and travel insurance. In 2014, Australian Unity celebrated its 175th anniversary.
  8. Bank of Melbourne – Bank of Melbourne offer discounts for the over-50s, being claim-free for 2 years, and installing security systems. Bank of Melbourne was founded in 1989 and exists exclusively in the state of Victoria. Check out their Melbourne Made short film campaign that celebrates the Victorian people and businesses who bank with them.
  9. BankSA – BankSA offer discounts for the over-50s, being claim-free for 2 years, and installing security systems. BankSA was founded in 1848 as a one-man, one-room operation, and it exists exclusively in the state of South Australia.
  10. Bankwest – Bankwest currently offer a 15% discount for buying a home and contents policy online, and you can pay for the month at no extra cost. They were founded in 1895 as the Agricultural Bank of Western Australia by the state government to provide for farmers. Back then, WA was so big and empty that staff would travel miles between farms, sleeping on the side of the road. In 2008, Bankwest became part of CommBank.
  11. Bendigo Bank – Bendigo Bank offers landlord, home, car, life, health, travel, caravan, boat, and loan repayment insurance. Bendigo Bank serves around 1.5 million customers across Australia.
  12. BOQ – Bank of Queensland was founded in 1874 and has over 250 branches across Australia. Their insurance is provided by Vero Insurance.
  13. Budget Direct – Budget Direct offers insurance for landlords, home, life, health, cars, travel and pets. They offer a 20% online discount and multi-policy discounts, and you can make a claim online 24-7. Budget Direct has insured over 1.5 million Aussies since they were founded in 2000.
  14. Bupa – Bupa offer landlord, home and contents, life, health, car, boat, caravan, trailer, pet and travel insurance. They provide a 10% discount to Bupa health insurance members. Bupa began providing health insurance in the 1930s in Australia, and they are now present in over 190 countries.
  15. Catholic Church Insurances – CCI provide a 10% discount for buying online, and they have a no claim bonus of up to 30%. They offer landlord, home, car, caravan, personal accident, and travel insurance. For every person that purchases CCI insurance, they donate $10 to Caritas Australia to benefit poor people in developing nations. Other profits go towards benefiting the Catholic community through programs such as World Youth Day, Prison Ministers, and Run for Refugees.
  16. CGU – CGU offer landlord, home, life, car, boat, caravan, travel, strata, workers compensation, and business insurance. Their policies seem relatively simple to understand, with a short list of exclusions. They have been around for more than 160 years and nearly half a million properties are insured with CGU. Check out their helpful guide on preparing for a natural disaster.
  17. Citibank – At time of writing, Citibank provides a 10% discount for buying online. They offer landlord, home, life, income protection, car, travel, and critical illness insurance. Their hassle-free emergency claims number is available 24-7. Citibank was the first foreign bank to be granted a banking licence in Australia, and they arrived here in 1985.
  18. Commonwealth Bank – CommInsure currently offers a 15% discount when you buy online. They offer home, life, income, car, travel, loan repayment, and credit card repayment insurance. CommBank is Australia’s largest provider of financial services. They have online calculators to help you work out how much cover you might need based on the value of your Property and Contents.
  19. CUA – CUA currently offers a no claim bonus of up to 30%, and you can pay fortnightly or monthly at no extra cost. They offer landlord, home, life, health, income protection, business, car, boat, caravan, travel, and loan repayment insurance. Founded in the 1940s in Queensland, CUA is now Australia’s largest customer-owned financial institution.
  20. GIO – GIO currently offers a 10% discount for buying online and a 10% multi-policy discount if you have 3 or more insurance policies with them. Their policy includes new for old replacement regardless of age, and also covers contents stored in common property spaces and damage to plants and gardens. They offer landlord, home, car, boat, caravan, travel, commercial, public liability and workers compensation insurance.
  21. HBF – HBF are best known for their health insurance, but they offer landlord, home, life, car, and travel insurance. Policy holders receive a HBF Privilege Card with discounts off movie tickets, hotels, wine and gift cards. At the time of writing, you can get a 14.5% discount if you are also a HBF health insurance member. HBF started in WA in 1941 as the Metropolitan Hospital Benefit Fund.
  22. 22.   HSBC – HSBC currently offers a 10% discount for buying online, an additional 10% discount if your investment property is managed by a licensed property management agent, and a no claim bonus of up to 30%. They offer landlord, home and contents, life, car, and travel insurance. HSBC is present in 72 countries and is one of the world’s largest financial services providers.
  23. IMB – IMB offer landlord, home, car, caravan, travel, and credit protection insurance. You can pay by the month at no extra cost. IMB members get a 15% discount of membership to the University of Wollongong’s Early Start Discovery Space for kids.
  24. NRMA – NRMA provides loyalty discounts the longer you stay with them. They offer landlord, home, life, income protection, funeral, car, caravan, bicycle, boat, travel, and business insurance. You may know NRMA from their ads featuring the Queensland Broncos.
  25. OnePath – OnePath offers new for old replacement regardless of age. They offer landlord, home, life, income protection, car, and travel insurance. OnePath are also known for providing investment services and super and have been around for over 130 years as Mercantile Mutual and ING Australia.
  26. Over Fifty Insurance – Over Fifty provide insurance for customers aged 50 or over, with a 10% discount for buying online. They offer landlord, home, car, caravan, boat, and travel insurance.
  27. 27.   People’s Choice Credit Union – People’s Choice have teamed up with CGU to provide flexible landlord insurance policies. They offer landlord, home, car, boat, caravan, income protection, travel, and business insurance. People’s Choice began in 1949 and has over 345,000 members.
  28. QBE – At time of writing, QBE provides a 20% discount for buying online, and their policy covers an amazing range of natural disasters. QBE have been in operation for 127 years and they offer landlord, home, car, boat, caravan, and travel insurance. QBE Group was started in 1886 by two young Scotsmen, and is now present in 38 countries.
  29. RAC – The Royal Automobile Club of WA gives a $35 discount for buying online. They offer Roadside Assistance as well as insurance for your investment property, home, life, car, and caravan. The club was formed in 1905, mainly for social purposes.
  30. RACT – The Royal Automobile Club of Tasmania offers insurance for landlords, home and contents, strata properties, car, boat, and caravan. RACT was established in 1923.
  31. RACV – The Royal Automobile Club of Victoria offer a 10% multi-policy discount, loyalty discounts of up to 20%, and a no claim discount of up to 25%. They offer landlord, home, renter’s, car, caravan, boat, travel, and business insurance.
  32. SGIC – SGIC offer discounts of up to 25% for both no claims and loyalty. They offer landlord, home, renter’s, car, boat, caravan, travel, and business insurance. SGIC and NRMA have teamed up to provide car insurance in South Australia since 1971.
  33. SGiO – SGiO offer discounts of up to 25% for both no claims and loyalty. They offer landlord, home, car, boat, caravan, travel, and business insurance. SGiO has been providing insurance in WA since 1926 on the gold fields.
  34. St. George – St. George is best known as the bank with the dragon logo, but they also offer insurance for your investment property, home and contents, life, income protection, car, boat, caravan, credit card and loan repayments. They offer new for old replacement. They provide a discount if you install a security system, as well as no claim and over-50s discounts.
  35. Suncorp – Suncorp Insurance won the CANSTAR state award for Western Australia for landlord insurance in 2015. They offer $50 off for buying online, and a 15% multi-policy discount. Suncorp provides landlord, home and contents, life, income protection, car, boat, caravan, and travel insurance.
  36. Terri Scheer – Terri Scheer won the CANSTAR national award for landlord insurance in 2016. Terri Sheer is Australia’s leading specialist provider – they only offer landlord insurance. At the time of writing, they offer a 5% discount off the first year’s premiums for buying online. They are Australia’s most-referred landlord insurer, with more than 8,000 Property Management offices referring landlords to Terri Scheer.
  37. Westpac – Westpac has a particularly no claim discount requiring just 1 year without claims, and you can pay monthly at no extra cost. They offer insurance for your investment property, home, life, income protection, car, travel, and credit and loan repayments. Westpac was established in 1817 as the Bank of New South Wales and serves around 13 million customers.