What Does Landlord Insurance Cost in 2018?

Looking to rent your investment property out? Then you might want to know how much the average insurance policy costs in your state, according to Canstar Research.

Renting out a property to tenants can be a sound investment strategy, and landlord insurance is usually considered essential for property investors in order to provide financial security against the risk of leasing. But it is not without its costs.

There are certain things you might want to be aware of when taking out landlord insurance, like:

  • Premiums
  • Changes in rental prices across Australia
  • Common claims made by Australian landlords

Landlord insurance premiums

Premiums for other products such as life insurance and health insurance have risen recently, and there have also been increases for landlord insurance – in some cases. It really depends on the state you live in: for houses, premiums have risen in almost every state except Queensland, whereas there have also been decreases in cost of insurance policies for units in every state except NSW, Western Australia and Tasmania.

North Queensland has seen particualrly large falls in the cost of landlord insurance, but insurance is already much more expensive there due to the prevailing threat of tropical cyclones.

Average Premiums – 2017 vs 2018

Houses
State 2017 Average Premium 2018 Average Premium % Change in Premiums
NSW $1,363 $1,495 9.67%
VIC $1,194 $1,278 6.98%
QLD (exc. North QLD) $1,815 $1,771 -2.44%
NQLD $5,091 $4,330 -14.96%
WA $1,268 $1,376 8.49%
SA $1,052 $1,101 4.67%
TAS $1,195 $1,280 7.14%
Units/Townhouses
NSW $375 $405 7.84%
VIC $335 $297 -11.54%
QLD (exc. North QLD) $404 $369 -8.62%
NQLD $771 $689 -10.58%
WA $374 $395 5.59%
SA $321 $310 -3.63%
TAS $337 $343 1.83%
Source: www.canstar.com.au. Quotes obtained for Allianz, Coles, NRMA, QBE, SGIC, SGIO and Suncorp. Premiums are annual premiums based on $450,000 building cover and $25,000 contents cover for a house, and $25,000 contents cover for a unit or townhouse, with a target excess of $500 (with $600 used when $500 is unavailable) at all addresses considered within each state/region included in the Canstar Landlord Insurance Star Ratings in 2017 and 2018.

If you’re in the market for a landlord insurance policy, the tables below displays a snapshot of the current policies available for a house on Canstar’s database, sorted by Star Rating (highest to lowest).

The below results are based on a policy holider residing in New South Wales, featuring links direct to the providers website.

Compare Landlord Insurance Providers

Shifting rental prices in Australia

Domain’s quarterly State of the Market Report for March 2018 shows the average rental prices for both units and houses in each state, and how these prices have moved.

This report shows that rental markets have recorded different changes depending on the state. Prices have increased overall in Hobart, Melbourne and Adelaide, which is tough news for those who can’t afford to buy, but good news for those who own an investment property, which, if you’re reading this article, might just be you. On the other hand, prices have decreased in Darwin and Brisbane, while remaining relatively stagnant in Sydney.

The tables below show the average weekly rent for houses and units in each major city, as well as what portion of your annual rental income could go towards insurance premiums based on the above data.

Rental prices for houses

2018 March Quarter Median Weekly Rent – Houses
Capital Rent ($/week) Quarterly Change Yearly Change % of rental income spent on insurance (2018) 
Sydney $550 0% 0% 5.2%
Melbourne $430 1.2% 2.4% 5.6%
Brisbane $400 0% -1.2% 7.9%
Hobart $420 6.3% 15.1% 5.8%
Perth $355 1.4% -4.1% 7.4%
Adelaide $375 1.4% 4.2% 5.6%

Source: Domain. % of rental income data from Canstar’s 2018 Landlord Insurance Star Ratings (July).

Rental prices for units

2018 March Quarter Median Weekly Rent – Units
Capital Rent ($/week) Quarterly Change Yearly Change % of rental income spent on insurance (2018) 
Sydney $550 0.9% 3.8% 1.4%
Melbourne $410 2.5% 3.8% 1.4%
Brisbane $375 1.4% -1.3% 1.8%
Hobart $350 2.9% 14.8% 1.9%
Perth $300 0% 0% 2.6%
Adelaide $300 1.7% 1.7% 2.0%

Source: Domain. % of rental income data from Canstar’s 2018 Landlord Insurance Star Ratings (July).

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The most common landlord insurance claims

Landlord insurance can be helpful to some property owners with rental properties, as it can help protect both their investment and the rental income received from it. According to Terri Scheer, as well as a variety of other sources, such as Domain.com.au, the most common landlord insurance claims are as follows:

  1. Loss of rental income
  2. Malicious and accidental damage
  3. Water damage
  4. The death of a tenant

Loss of rental income

According to Terri Scheer Insurance, the loss of rental income due to the behaviour of tenants is the number one claim made by landlords.

Carolyn Parrella, Executive Manager of Terri Scheer Insurance, says that “more than half of claims made by landlords were caused by absconding or defaulting tenants. A tenant who falls behind in their rent poses one of the greatest financial risks to landlords. Arrears can be a very long and costly process to resolve”.

Even the best tenants imaginable can suddenly stop paying rent for a variety of reasons, like financial difficulties they’re experiencing or being diagnosed with an illness. Whether their failure to pay rent is intentional or unintentional, not receiving rent from your tenants can leave you short on your investment.

Any decent landlord insurance policy should cover you for rental income loss in a range of circumstances, and Canstar does not rate products unless they cover loss of rent due to tenant default. To help identify a potentially bad tenant, make sure you read our article on how to find a good tenant for your investment property.

Malicious and accidental damage

The second most common landlord insurance claim is for malicious and accidental damage. It can be extremely expensive to repair damage to your property – either accidental or otherwise – and malicious or accidental damage cover can protect you from a host of common accidents.

“Malicious damage covers everything from holes punched in walls and doors that have been kicked in, through to intentional damage to carpets and floors,” Parrella said. “Tenants who damage a rental property can leave landlords with large cleanup bills and significant replacement costs.”

As with the loss of rental income, a product must offer cover for malicious damage or vandalism by tenants or their guests to be eligible for Canstar’s Landlord Insurance Award. The specifics can vary, but you can find the right cover for you by comparing various products on the market.

Water damage

The third most popular claim is water damage. It is important to know that water damage is different to flood damage or storm damage.  It mainly covers water damage from appliances and fittings, such as leaks, burst pipes, and sinks, etc. Many home and contents insurance providers exclude water damage due to excessive damage caused by tenants, so it’s important to shop around to consider a landlord insurance policy that does cover this type of water damage.

The death of a tenant

Unfortunately, the death of a tenant is not all that uncommon in Australia, as it is the fourth most common claim by landlords.

A good landlord insurance policy will cover you for the loss of rent you would have received if the tenant is the sole person on the lease.

This is why you should do as much independent research as you can before choosing a landlord insurance policy. You can use the Canstar website to have a look at the insurance policies on the market that suit your needs.

Compare Landlord Insurance Providers with Canstar

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