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Landlord insurance is a great precaution for anyone who is leasing out their property. It’s specifically designed to protect landlords from events that can affect their investment (e.g. storm damage to the roof) and from scenarios which can leave them out of pocket (e.g. renters not being able to pay their rent).

Landlords will have the option to purchase landlord insurance, building insurance, contents insurance (protects valuables if leasing out a furnished property), or combined building and contents insurance.

What is building cover?

If you are getting building cover only, you’ll need to establish what your building cover will actually pay for (in the event of a claim) by reading the Product Disclosure Statement (PDS). A building policy generally protects the structure of your property, including:

  • pipes
  • cables
  • fixed appliances (e.g. dishwashers, air conditioners)
  • gas or plumbing systems
  • fixtures and fittings (except for carpets, loose floor coverings, curtains and internal blinds)
  • exterior blinds and awnings
  • some external structures (e.g. fence, swimming pool).

Building insurance will typically cover you for the complete or partial destruction of your property or for the loss of rent while the property is unliveable. Without it, you’d need to rebuild or pay for repairs out of your own pocket, which could cost a lot of money – particularly if you weren’t earning rent from the property while it was damaged.

If your property is part of a residential unit block, the body corporate normally insures the building’s foundation (i.e. exterior walls, ceilings), which means you have to rely on strata insurance for structural damage.

What is contents cover?

Decking out your rental home isn’t always cheap, depending on which appliances and electronics you think are worth adding to make the rental more appealing (e.g. air conditioners, dishwashers).

If you are renting out a furnished home, you can get additional contents only insurance against the loss, theft or damage of furniture, appliances and additional furnishings (e.g. carpets, curtains, blinds).

This will save you from needing to pay for another leather couch or coffee machine out of your own pocket if they’re damaged, destroyed, stolen or stop working.

What is liability cover?

Liability cover helps pay for potential legal fees and compensation for damages in case of an unforeseen accident where a person sustains an injury at your rental property and you’re at fault. As such, it’s an important feature of landlords insurance.

For example, if your tenant or their guest slips or trips over a on wet surface within your property boundaries and breaks an arm, this benefit would help to cover your liability for compensation to the third party.

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Rental cover explained

Depending on your landlord’s insurance policy, you may be able to get protection for your rental income. Your policy may cover your losses (up to a dollar amount or number of weeks) if your tenant misses payments or can’t pay their rent, or if a tenant breaks their lease early and it results in you losing rent.

Also, if your tenant owes you an amount of money and you need to take them to court, your landlord’s insurance policy may cover your legal costs.

However, each landlord insurance product is different, so you should always refer to your PDS to see exactly what’s covered.

What events does a landlord’s insurance policy cover against?

While this might not come as a surprise to many investment property owners out there, landlord insurance won’t cover your property (and/or the contents inside) against every possible event or scenario.

That being said, it can be an exhaustive list! Standard landlord insurance policies typically offer protection against:

  • storm and rainwater damage
  • damage from explosions
  • fire damage (excluding damage from cigarette smoking, scorching or melting)
  • water damage
  • malicious damage and vandalism
  • theft and attempted theft
  • impact damage (e.g. if a car crashes into the home or a burglar damages it)
  • lightning damage
  • earthquake damage
  • civil unrest and rioting
  • debris removal
  • escape of liquid (excluding the costs of repairing or replacing the item that leaked)
  • lease break and loss of rent
  • legal action against bad tenants
  • legal liability.

You may also be able to choose the excess you pay and add on optional extras (at an additional cost), such as cover for:

  • motor burnout (i.e. covers appliances when they stop working)
  • accidental damage
  • flood damage
  • sum insured safeguard (i.e. increases your sum-insured by a certain amount if it’s insufficient)
  • temporary accommodation costs
  • rent default (when tenants miss rental payments or can’t pay their rent)
  • theft and malicious damage caused by the tenant.
  • civil unrest and rioting.

Standard policies will generally not cover damage from:

  • movement of the sea (i.e. king tides)
  • falling trees
  • vermin (and other animals besides rodents and insects)
  • war and uprising

Once you have a landlord insurance policy, it’s important to thoroughly check your Product Disclosure Statement (PDS) to determine exactly what you are and aren’t covered for.

You can easily see which events are covered by certain policies by comparing landlord insurance in minutes through our landlord insurance comparison service.

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