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Why is it important to have landlord home insurance?

Mark Bristow avatar
Mark Bristow
- 4 min read
Why is it important to have landlord home insurance?

After purchasing your property, you’ve decided to rent it out and use it as an investment. But what happens if your tenant stops paying rent, or damages your property? Is there any way to protect your investment?

With landlord home insurance, you’re covered against loss of rental income, damage to your property and damage to any contents in the property that belongs to you.

To find the most suitable landlord home insurance policy for your needs, you’ll need to understand what it covers, what it doesn’t, and any other benefits.

What does landlord home insurance cover?

Renting out your home typically exposes you to three types of potential losses:

  1. Loss of rental income
  2. Damage to the property
  3. Damage to its contents

Landlord insurance policies offer you protection across these three critical areas.

Loss of rental income

You could face a loss of rental income due to a range of events and circumstances:

  • Non-paying tenant: Your tenant fails to pay rent over a period that triggers them to receive a termination notice, or their lease is terminated by a court or tribunal order.
  • Tenant refusing to leave: Your tenant refuses to pay rent and doesn’t vacate your property even after they have been served with a court order.
  • Tenant financial difficulty: Your tenant is released from their lease obligations by a court due to financial hardship.
  • Missing tenant: Your tenant moves out without giving you notice or at the end of the lease with rent still owing.
  • Difficulty accessing property: Your tenant cannot access your property due to damage to surrounding properties.
  • Sudden death of a tenant: Your tenant passes away whilst still under lease.
  • Damaged property: Your property cannot legally be leased because of malicious damage by a previous tenant, or another insured event.

Damage to the property

If your property is damaged because of your tenant, their family, guests, or another insured event, landlord home insurance will cover the cost of repair or replacement for the following:

  • Unexpected loss or damage: Your property faces sudden and unexpected damage due to an accident of some sort.
  • Unexpected insured event: Your property gets damaged due to events such as fire, flood, storm and water damage.
  • Burglary: Any theft that has occurred as well as any damage to your property because of theft.
  • Pet damage: Your damage is caused by a domestic pet owned by the tenant and listed on the lease.
  • Deliberate damage: Your property is intentionally damaged without your consent.
  • Hateful damage: The damage to your property has been done with malice.
  • Burning: There is damage due to cigarettes, irons or pots and pans spoiling the carpet, benchtops, or other parts of the property.

Damage to contents

Any damage to the contents that you own, or for which you are legally responsible, in your investment property are covered by home contents insurance for landlords. These contents include:

  • Portable household items
  • Electrical appliances
  • Curtains and blinds
  • Carpets and rugs
  • Manchester and linen
  • Above-ground pools
  • In case of a strata-titled building, contents also include temporary wall, floor and ceiling covers

What additional benefits do I get with landlord home insurance?

As well as the three main coverage areas, landlord home insurance can cover you against a host of additional expenses, such as:

Legal costs

Any legal and representation expenses you incur while attempting to reduce your losses.

Sheriff/bailiff expenses

The cost of using a bailiff or sheriff to evict your tenant.

Legal liability protection

Covers you if your tenant or another party dies or is hurt at your property. Also if someone else’s property is damaged, and you’re held responsible or negligent in any way.

Removing tenant’s belongings

The cost of removing your tenant’s possessions after you’ve made an insurance claim for loss of rent.

Lock change

When you need to replace the locks after your tenant has been evicted by court order.

How to choose the best home insurance for landlords

Every insurer has different coverage under their landlord home insurance policies. To ensure that you find the one that suits your needs, keep these tips in mind:

Combined or building-only cover

If your property is fully furnished, you may want to include contents insurance. However, for an unfurnished property, you could go with a building-only cover. Just remember that curtains, internal blinds, carpets, and many other items are only covered by contents insurance, which could make combined building and contents cover worth considering.

Cover while vacant

Find out if your cover is maintained if your property remains vacant for an extended period. To ensure the cover remains, you may have to prove you’re actively seeking a replacement tenant.

Look for pet damage

Ensure your landlord insurance policy includes damage caused by pets owned by tenants or their guests.

Do your research

Don’t rush into buying a policy. Research and make a landlord home insurance comparison to see which one works for you the best.

Compare home insurance

Product database updated 25 Jun, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.