This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.
Key takeaways
- Building insurance covers the physical structure; landlord insurance covers rental-specific risks like tenant damage, lost rent, and legal liability. Most landlords need both.
- Landlord insurance typically costs between $300 and $800 per year for a standard residential property.
- Rent default cover (for when a tenant stops paying) is sometimes included and sometimes an add-on. It is especially valuable if you self-manage.
- Both building insurance and landlord insurance premiums are fully tax-deductible in the year you pay them.
- Most policies do not cover general wear and tear, pre-existing damage, or properties left vacant for more than 60 to 90 days.
Insurance for rental properties is one of those things that feels fine to put off, until it isn't. A tenant vacates without warning, a burst pipe causes damage, or a visitor breaks an arm on a loose step and decides to sue. Understanding which policies actually protect you, and what they each do, is one of the more useful things you can do before something goes wrong.
Building Insurance: Usually Not Optional
If you have a mortgage on your investment property, your lender almost certainly requires you to hold building insurance as a condition of the loan. It covers the structure itself (walls, roof, floors, fixed fittings) against events like fire, storm, and some forms of water damage.
For properties in a strata complex, the owners corporation typically holds building insurance for the shared structure, and your strata levies partly fund it. You should confirm with the body corporate what is covered and what is not, as your internal walls, fixtures, and contents are usually your responsibility.
Landlord Insurance: The One Worth Paying For
Building insurance protects the bricks. Landlord insurance protects your investment as a rental business.
A standard landlord insurance policy typically includes:
- Malicious damage by tenants: deliberate damage beyond normal wear and tear, from punched walls to pulled-out fittings
- Loss of rent: if the property becomes unliveable due to an insured event (fire, flood) and your tenant has to leave, the policy covers your lost rental income while repairs are underway
- Legal liability: if someone is injured on your property and pursues a claim against you, legal liability cover pays your defence and any damages awarded
- Theft by tenants: if a tenant takes your whitegoods, appliances, or other contents you provided
Policies vary significantly between insurers, so it is worth reading the Product Disclosure Statement carefully rather than comparing prices alone. Pay attention to what triggers loss-of-rent cover, how malicious damage is defined, and what excesses apply.
Rent Default Insurance: Worth Knowing About
Some landlord policies include rent default cover as a standard feature; others offer it as an optional add-on. It is not the same as loss of rent.
Rent default covers you when a tenant simply stops paying rent and is still in (or has recently vacated) the property. It typically kicks in after a set number of weeks of unpaid rent and pays out for a defined period (often up to about 15 weeks) while you work through the tribunal process to recover the property.
If you self-manage your property without a real estate agent, this cover is particularly worth considering. Agents often catch rental arrears faster because they have systems and workflows for it; if you are managing yourself, the gap between "tenant went quiet" and "I realise I haven't been paid for six weeks" can be wider.
Contents Insurance: That Is Your Tenant's Problem
Contents insurance covers personal belongings inside the property. It is the tenant's responsibility to insure their own possessions, not yours. If they leave a laptop on the kitchen bench and it gets damaged in a flood, that is their insurance claim, not yours.
The exception is if you have furnished the property yourself: your furniture, appliances, or whitegoods. In that case you may want contents cover for those items, and some landlord policies include this.
What Is Typically Not Covered
Policies vary, but most landlord insurance policies do not cover:
- General wear and tear: faded paint, worn carpet, tired grouting. This is expected over time, not insurable damage.
- Pre-existing damage: damage that existed before the policy started or before the tenant moved in. Condition reports at the start of every tenancy are your protection here.
- Properties left vacant for extended periods: many policies suspend or limit cover if the property is vacant for more than 60 or 90 consecutive days. If you are renovating between tenancies or struggling to find a tenant, check your policy wording.
- Gradual damage: slow leaks, rising damp, pest damage that built up over time. Insurers draw a line between sudden events and things that could have been caught with regular maintenance.
What It Costs
Landlord insurance typically costs between $300 and $800 per year for a standard residential property, depending on the insurer, your state, the property's value, and the cover level you choose. Properties in flood zones, cyclone-prone areas, or with higher rebuild values will cost more.
That range is a rough guide only. Get quotes from at least two or three insurers rather than accepting the first number you see. Insurance is one of several holding costs that determine whether your property is cash-flow positive or negative. Use the cash flow calculator to see how your premiums fit alongside mortgage repayments, rates, and management fees, or the break-even rent calculator to find the minimum weekly rent you need to cover all your costs.
Is It Tax Deductible?
Yes. Both building insurance and landlord insurance premiums are deductible expenses in the year you pay them, provided the property is rented or genuinely available for rent. Keep the renewal invoice as your receipt. As always, check with your accountant for advice specific to your situation, particularly if the property is used privately for any part of the year.
For a full list of deductible expenses across your rental property, see our guide to landlord expenses you can claim, or our complete guide to rental property tax deductions in Australia. If you are wondering whether your property is negatively geared once insurance and other costs are factored in, the negative gearing calculator gives you a quick answer.
Keeping Track of Your Policies
One of the quieter risks landlords face is letting a policy lapse without realising it. Annual renewals do not always arrive at convenient times, and it is easy to miss a renewal notice when you are juggling work and tenants.
propkt's document vault lets you store your insurance policy documents against each property and set an expiry date. You'll receive a reminder 30 days before renewal is due, and again at 7 days, so you have time to review your cover, shop around if you want to, and make sure you are never accidentally uninsured. Open your property in propkt, go to the Documents section, and upload your policy under the Insurance category.
propkt's document vault keeps your insurance policies, certificates of currency, and renewal dates organised per property, with automated reminders before they expire. Try propkt free.