Do I need landlord insurance?

Shifts in interest rates often play a key role in driving property market trends, and Sydney continues to show strong growth in real estate values—offering promising opportunities for investors.

Rental income and increased equity can help safeguard your financial future in the long term. The downside? Unforeseen events, such as sudden vacancies or late payments, can temporarily set you back.

This is where landlord insurance comes in. However, according to QBE’s recent survey of Australian landlords, only 56% of investors[1] have this safety net in place.

So, is landlord insurance really something you need as an investor? Let’s find out in this expert guide from DiJones.

What is landlord insurance?

Landlord insurance is a specialised type of coverage designed to protect people who rent out investment properties to tenants. It covers potential risks that property owners may face, such as loss of rent, tenant default, malicious damage, and legal liability.

For example, if a storm damages your property’s roof, forcing a tenant to move out while repairs are underway, landlord insurance usually covers the loss of rental income as well as the damage itself.

Landlord insurance not only safeguards you from financial loss; it also supports your investment’s long-term growth.

Is landlord insurance legally required in New South Wales?

In most cases, investors are required to take out building insurance as a condition of their mortgage - but only if the property is a standalone house. If the property is part of a strata lot, building insurance is typically covered by the owners corporation. That said, landlord insurance remains optional and isn’t a legal requirement for rental properties in New South Wales."

Landlords are legally obliged to cover the cost of repairs and maintenance to their investment property. Therefore, renting it out leaves you open to a number of risks that can significantly impact your income and your property’s value.

Property owners who choose to take out a policy usually do so because it protects them against unexpected costs.

Why landlord insurance in New South Wales is (almost always) necessary

Even though landlord insurance isn’t compulsory in New South Wales, most property managers will encourage investors to secure it.

There are significant benefits to having landlord insurance. It can help you:

• Protect your investment: Your policy typically covers damage to your property caused by natural disasters (for example, floods, storms and fires) and, in some cases, tenants.
• Minimise financial losses: This includes protecting you from rent defaults or repairs needed after an insured event.
• Reduce stress: Landlord insurance gives you peace of mind when unforeseen events strike.

How much does landlord insurance cost in New South Wales?

If you’re based in Sydney, you can expect to pay an average of $2,056 per year for landlord insurance. However, the exact premium you’ll end up with depends on a few factors, including:

• Location: If your property is located in a higher-risk area (e.g., subject to bushfires or located in a flood zone), you’re considered ‘higher risk’, so you’ll likely pay a higher premium.
• Property type and value: Typically, houses are generally more expensive to insure than units.
• Property age and build: Older homes are often more expensive to insure.
• Your level of coverage: Typically, the more comprehensive your policy, the higher your premium will be.
• Excess amount (deductible): Agreeing to a higher excess can lower your annual premium.
• Security features: Does your property have alarms and deadlocks? If you have a good security system, this may be reflected in your premium with a lower rate.
• Tenant type: Short-term rental contracts lead to higher tenant turnover. This can result in lenders perceiving greater risk and ultimately charging a higher premium.
• Claims history: If you’ve made a number of claims in the past, this could drive up your future premiums.
• Bundled policies: Some insurers offer discounts on premiums when you bundle policies. For example, combining landlord insurance with home and contents coverage could result in a discount.
• Government charges: Some policies include stamp duty and other levies that drive up premiums.

What landlord insurance covers

Landlord insurance protects you from the risks of owning an investment property in Sydney. Here’s a snapshot of what it typically covers:

Tenancy

Landlord insurance protects you from several tenant-related issues that can impact rental income and the condition of your property. They include:

• Rent default if a tenant doesn’t pay you
• Malicious damage caused by tenants or their visitors
• Tenants stealing items you own
• Legal liability if someone is injured on your property
• Legal expenses for disputes or evictions

Damage to your property

Building cover is also included in landlord insurance. This protects your rental property from:

• Damage caused by natural disasters such as fires or storms
• Accidental damage to fixed parts of your home.
• Structural repairs to walls, floors and roofing
• Loss of rent if your property becomes uninhabitable due to an insured event

Contents

Contents coverage applies to items that you own and provide for tenants. They might include:

• Appliances and furniture, such as fridges, washing machines and sofas
• Soft furnishings, including carpets and blinds
• Accidental damage to landlord-owned contents
• Property damage, vandalism or theft by tenants

What landlord insurance doesn’t cover

Landlord insurance provides wide-ranging protection to investors. However, like any policy, it doesn’t cover everything. Here are a few common policy exclusions to be aware of so you’re not caught off-guard by unexpected surprises.

Landlord insurance doesn’t cover:

• Wear-and-tear from everyday use or ageing
• Maintenance issues, such as mould and plumbing blockages
• Your tenant’s belongings (which are their responsibility to insure)
• Unlisted events, such as pest damage or neglect
• Short-term rental exclusions unless specifically covered

In addition, optional extras might be needed for:

• Natural disasters, such as floods or earthquakes
• Tenant default or malicious acts (although not always included)

Review the Product Disclosure Statement (PDS) of your policy to understand exactly what’s covered and what’s not.

How to find the best landlord insurance for your needs

When you’re looking for the right coverage, it’s tempting to pick the least expensive option you find. However, the cheapest option isn’t always the best landlord insurance — or most cost-effective — in the long run.

Consider looking for an insurer who offers excellent protection and value for money. This gives you peace of mind and certainty, which you deserve to have, at an affordable rate.

Here are six steps you can take to secure the best option for your needs:

1. Decide what you need

Establish what you actually need coverage for. The last thing you want is an expensive policy covering things you don’t need, but it’s important to ensure you’re adequately protected.

Do you need building and contents, rent default and legal liability coverage? Or do you just need some of these? If in doubt, consider seeking professional advice from a lawyer or one of our dedicated property managers.

2. Compare quotes

Compare quotes from several insurers to find the best policy for your needs. There are several online tools you can use to do this. Alternatively, a broker can help you compare prices quickly and find an insurer and a policy that fit both your needs and budget.

3. Read through the PDS

It’s essential to read through the PDS of your policy before taking out landlord insurance. Make sure you understand what you’re covered for, how claims are handled and what’s excluded from your policy.

4. Look for landlord-specific products

Some insurers offer generic policies, while others tailor theirs to better suit the needs of landlords. Policies that are designed for investors usually offer better protection and might end up being cheaper than generic policies.

However, every insurer is different, so speak to a professional for assistance with finding the right policy for you.

5. Ask about discounts

Some providers offer discounts when you bundle landlord insurance with other policies. For example, you might be allowed to add buildings insurance or contents insurance (or even personal insurance, such as income protection and life insurance) to your landlord coverage. Ask your provider if this is something they offer.

6. Reassess regularly

The insurance industry is very competitive. As a result, providers regularly update and amend their policies to attract customers.

Consider reassessing your policy on an annual basis to determine if it still suits your needs.

7 key considerations before buying landlord insurance

While many real estate experts recommend landlord insurance, it’s important to make a decision you’re comfortable with. Weigh up the following factors before committing to a policy:

1. Lender requirements: Do you need to take out a policy? Mortgage providers often require building insurance.
2. Financial reserves: Can you afford to cover the cost of repairs if they were needed or manage a potential loss of income?
3. Risk appetite: Are you comfortable going without landlord insurance?
4. Location: You might need more comprehensive coverage if your property is located in an area prone to floods, fires or crime.
5. Type of property: If your property is a heritage home or furnished unit, you might need a niche type of coverage.
6. Tenancy model: If you rent out your property on platforms like Airbnb, you might require a specific policy.
7. Insured value: Make sure the insured sum of your property accurately reflects its rebuild costs. Underinsuring your property can lead to shortfalls if you ever need to make a claim.

In brief

Landlord insurance isn’t legally required in New South Wales. However, it’s a smart way of protecting your investment and your rental property from unexpected setbacks.

From rent default and legal liability to accidental or malicious damage, having the right insurance helps you safeguard your investment. It can also give you more certainty and peace of mind.

If you’re renting out a property or planning your next move as an investor, contact us. We’re here to help you manage property ownership with confidence. From choosing the right tenants to protecting what matters most, we’re here for you every step of the way. 

FAQs

Is landlord insurance tax-deductible in Australia?

Yes. If your insurance relates to earning rental income, you can usually claim it as a tax deduction. Your accountant will be able to confirm this.

Can I insure a short-term rental property like an Airbnb?

Some insurers offer coverage for short-term stays, but not all do. You should always declare the nature of your rental property to ensure your insurance product is valid.

Does landlord insurance cover accidental damage by tenants?

Many policies include this as an optional extra. Check the Product Disclosure Statement (PDS) to confirm if accidental damage is part of your policy.

What’s the difference between building insurance and landlord insurance?

Building insurance protects the physical structure of your property. However, landlord insurance is specifically designed for rental property owners. It includes additional coverage like rent loss, tenant damage, and liability.

Will my premium increase if I make a claim?

Making a claim could increase your premium. Your claims history is one of several factors influencing your premium, along with the type of property you own and the level of coverage you have.