The Cost of Landlord Insurance

What do the premiums for landlord insurance cost? How much of your rental income is going into insuring your investment property?

Landlord Insurance is an absolute must for property investors, providing financial security against the potential risks of leasing, such as damage, rent defaults or theft.

But CANSTAR’s research shows the cost of insurance can make a significant dent in rental income, making it vital that owners shop around for the best value cover possible. There are several things for homeowners to consider before committing to a particular policy and a hurried decision could end up costing them more of their rental income that it needs to.

That said, lowest costs don’t automatically mean the best value insurance. Landlords also need to be wary of getting a cheap landlord insurance policy with lots of exclusions. Not all providers cover the same things and you don’t want to be left with any nasty surprises at claims time.

What is the cost of landlord insurance?

Average landlord insurance premiums vary across the states and territories, as does the percentage of rental income they account for.

The tables below show the median rental income, average insurance costs, and percentage of rental income across eight difference locations in Australia. These costs are based on a landlord insurance policy with $300,000 of building insurance cover (for houses) and $25,000 of contents insurance (for both houses and units).

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Price of landlord insurance for Houses

Location Median Annual
Rental Income
Average Annual
Insurance Premium
Percentage of Income
spent on Insurance
Sydney $27,560

($530/week)

$1,160.53 4.2%
Melbourne $20,800

($400/week)

$928.07 4.5%
Brisbane $20,800

($400/week)

$1,112.37 5.3%
Adelaide $18,460

($355/week)

$891.82 4.8%
Perth $20,280

($390/week)

$939.41 4.6%
Hobart $18,200

($350/week)

$836.91 4.6%
Source: Average premiums from CANSTAR – Landlord Insurance star ratings report.

Median rental income from Australian Property Monitors – June 2016 Domain Rental Report.

Below you will find a small sample of the current 5-star landlord insurance policies available on the Canstar database for house’s in each respective state.

Price for house landlord insurance in:


In Sydney, rental income for house type investment properties has increased 5% over the past year, and landlord insurance costs on average 4.2% of an investor’s rental income. This is a slight improvement over last year, when insurance cost 4.3% of rental income.



Melbourne saw growth of 2.6% for rental house prices and landlord insurance costs 4.5% of this income on average. This shows the price of insurance in Melbourne has increased, since in 2015, insurance equated to 4.2% of income.


Meanwhile, Brisbane’s rental income for houses remained steady over the past 12 months, while landlord insurance costs 5.3% of that income on average. This is equivalent to 2015 levels with no major change in the relative, proportional cost of insurance.



Adelaide saw growth of 1.4% in rent for houses, while landlord insurance now costs 4.8% of annual rental income on average. Comparing this to 2015 levels, when insurance cost 4.7% of rental income, it’s clear that insurance providers have increased their prices slightly more than may be warranted.



Perth rental incomes have fallen by -9.3% for houses since 2015 figures, with the mining boom coming to an end – but insurance providers are still jacking their prices up. Insurance now costs 4.6% of income on average, compared to 4.0% in 2015. And even more worryingly for landlords, vacancy rates in Perth are now the highest of all the state capitals according to Domain’s report.



Hobart is the cheapest place we surveyed in terms of insuring an investment property – and it has seen the highest growth in rental income at 6.1% growth year-on-year from 2015. The rental income in Hobart is still the lowest of our state capitals on average, so insurance still amounts to 4.6% of income on average. However, this is an improvement on 2015 when insurance cost 4.9% of rental income.

Price of landlord insurance for Units

Overwhelmingly, insurance costs across the board have gone up – and by more than the growth in rental income prices.

Location Median Annual
Rental Income
Average Annual
Insurance Premium
Percentage of Income
spent on Insurance
Sydney $27,300

($525/week)

$419.25 1.5%
Melbourne $19,760

($380/week)

$335.49 1.7%
Brisbane $19,760

($380/week)

$396.99 2.0%
Adelaide $14,820

($285/week)

$316.61 2.1%
Perth $17,420

($335/week)

$347.55 2.0%
Hobart $14,820

($285/week)

$307.57 2.1%
Source: Average premiums from CANSTAR – Landlord Insurance star ratings report.

Median rental income from Australian Property Monitors – June 2016 Domain Rental Report.

Below you will find the current 5-star landlord insurance policies available on the Canstar database for unit’s in each respective state.

Price for unit landlord insurance in:


Sydney’s rental income for investment property units has increased 4% over the past year, and landlord insurance costs on average just 1.6% of an investor’s rental income. Insurance has gotten more expensive this year as rents have risen, as annual premiums used to cost 1.4% of rental income in 2015.



Melbourne saw the highest growth of the state capitals for units, with growth of 2.7% in rental prices for units. Landlord insurance costs 1.7% of this income on average, compared to 1.4% in 2015.



Brisbane rental income for units rose by 1.4%, while insurance costs 2.0% of that income. The proportional cost of insurance has stayed the same since 2015, showing insurance prices have risen to match rental income precisely.



Adelaide has seen a decrease in rental income from units, decreasing by 1.7% over the past 12 months. Insurance prices, though, have continued to increase. In 2015, insurance cost 1.7% of rental income, but this year insurance now costs 2.1% of rental income.



Perth unit rents have fallen by -10.7% over the past year, and as a result landlord insurance costs a higher proportion of that rent than it did last year, at 2%.



Hobart unit rental prices have increased to a new record of $285/week, according to Domain’s report, which shows growth of 5.6% from 2015. Insurance costs for units represent 2.11% of income.

Reducing the cost of your premium

Insurers will look at your postcode to determine how risky the area is for rent defaults and damage by tenants. It’s in a landlord’s best interests to go with responsible tenants who have a good renting history.

But there’s only so much you can do. Be aware that premiums are also based on location and the owner’s claims history. In terms of location, risk of natural disaster plays a big part – that’s why premiums in North Queensland, for example, are so much higher than the national metro averages.

 

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Source: CANSTAR

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