Landlord insurance: what you need to know about this crucial purchase

As a landlord, you may think that a typical building or contents insurance policy will cover you should anything go wrong with your property.

You’d be wrong.

That’s why landlord insurance exists. Along with typical building insurance policies that cover you for fire or theft, landlord insurance will often cover the following circumstances:

  • Damage caused by tenants, such as broken walls or ceilings
  • Damage caused by pets
  • Replacement of locks if they are damaged beyond repair or you believe they may have been duplicated
  • Water damage, perhaps from leaks or burst pipes
  • Rental default, such as when a tenant is late on rent for a significant amount of time or simply doesn’t pay
  • Legal liability. This would be useful if someone was injured, or died, on your property. This could also cover damage caused to another person’s property by your tenant. Every provider differs on what their legal or public liability covers.
  • Clean-up costs in case of major damage, such as significant rubbish pile-ups or graffiti.
  • Theft or burglary committed by tenants, or any guests of the tenants
  • Legal costs due to eviction notices

However, every policy is different – which is why it’s so important to shop around. You want to make sure you’re covered in case anything goes wrong, and that your individual policy caters to your circumstances.

Some key questions you might need to ask could include: does the policy have a cap for legal liability? Is typical building insurance included, or do you need to buy that separately? How large is the excess? Do I pay an excess for rent default? Will the policy cover you if the tenant abandons the property?  

To show how these policies can differ even on the slightest details, we’ve taken a look at some of the most popular providers. While many of these will cover a basic level of insurance, the devil is in the details. Just take a look at this table we’ve put together:

Tenants cashing in on airbnb

Seems complex, doesn’t it? We’ve broken it down more below, so take a look at how landlord insurance policies can differ:


AAMI

While AAMI offers a number of typical benefits including rent loss and flash flooding, some of its other coverage areas are “optional” including rent default, theft or burglary and full rebuilding cost protection. You’ll need to pay extra to include them in the policy.

Additionally, AAMI offers up to $20 million of legal liability protection – but the company doesn’t cover strata title buildings, where a rental is on a shared block or shares walls with other properties. For that you will need Strata Insurance, which does contain some provisions for landlords but doesn’t cover some other areas like rental default.

Read more.

Aon

Unlike many landlord insurance providers which give specific quotes, Aon sets prices and cover levels by state, which makes it easier for landlords to budget how much they need to spend:

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Aon also offers a “plus” version of its landlord insurance for those who need to tailor their coverage. Aon covers damage or theft by tenants, loss of rent, rent default and liability cover, and up to $20 million of legal liability cover. Legal costs are covered up to $1,000 per claim.

This flexibility is a big plus when deciding on landlord insurance, so consider getting a quote with Aon and seeing how it works out for you:

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Terri Scheer

While Terri Scheer offers the normal landlord insurance coverage including loss of rent and even failure to give vacant possession, you should be aware that Terri Scheer changes its pricing based on whether you use an agent or not.

This isn’t necessarily a common distinction, but it changes your coverage level. For instance, Terri Scheer covers up to 15 weeks of rent if your tenant defaults, and you use a property manager. But if you don’t use a property manager, that coverage drops to just 10 weeks.

Standard coverage is also included such as prevention of access and legal liability protection up to $20 million.

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EBM

EBM provides a more legal coverage than other providers – up to $30 million instead of the typical $20 million – but there are some key differences in EBM’s policies.

Firstly, EBM’s “RentCover” insurance is divided into three tiers: Ultra, Platinum and ShortTerm, with the latter catering to just holiday letting and corporate leasing.

RentCoverUltra is designed for units and townhouses, and includes cover against “defined events”, such as a fire, storm, flood and water damage, so there isn’t any need for a separate contents policy.

RentCoverPremium contains everything in Ultra, but adds in building insurance as well as contents coverage.

The extra legal coverage and flexibility in EBM’s offering makes them a worthy contender, so definitely consider getting a quote from them for your own insurance.

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Allianz

While Allianz covers many typical areas including loss of rent and damage for fire, theft and storms, there’s a key difference: Allianz only covers up to $10 million in legal liability.

However, you can also add on additional cover for rent default and theft by a tenant. Just consider the lower legal maximum when you’re shopping around.

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QBE

Landlord coverage from QBE includes protection for fire, theft, floods, storms, vandalism and legal liability – but it makes two key changes to typical coverage. Unlike other policies, theft/vandalism from tenants and rent default are optional benefits – you’ll need to add them in if you want them.

Read more.

Bank of Melbourne

Bank of Melbourne offers insurance in tiers – you can buy building insurance, add contents insurance, and then add optional “landlord extras” such as malicious acts by the tenant, theft by the tenant or loss of rent. However, the coverage is relatively low compared to other dedicated offerings.

For instance, loss of rent coverage is only $1,000 per week for up to 10 weeks, while some other providers cover up to 52 weeks.

Consider that difference when shopping around.

Read more.

As you can see, landlord insurance providers all have slight changes that make it even more important to be intentional and careful when comparing offers. Firstly, determine what coverage you’re most likely to need, which policies are important to you, and then compare the different providers carefully.

The last thing you want is to be left with a claim and coverage that doesn’t reimburse you enough.

At Cubbi, we think it’s important to get coverage that is tailored to your own circumstances - but we would recommend looking at Aon or EBM first as they provide significant value for money.

Insurance is just one element of being a landlord that can be time-consuming – not to mention collecting rent, drawing up leases and managing inspections. At Cubbi, we make it our mission to empower landlords and tenants, and make life easier when renting out your property.

Read more about how Cubbi can help landlords.
Type:Blogs,Type:Investing,Type:Rent,Type:Lease