Landlord insurance in Australia: what it actually covers (and what it doesn't)

A tenant skips three weeks of rent, breaks a lease, and walks out leaving a kicked-in bedroom door and a kitchen the bond won't cover. The landlord's building policy looks at the claim and says no, because the building policy was never designed for tenancy risk. Landlord insurance is the policy that picks up the phone in that scenario, and it's the line item most first-time investors either skip or misunderstand.

Landlord insurance vs building insurance

These are two different products that often get bundled and sometimes get confused.

• Building insurancecovers the structure itself: fire, storm, escape of water from a burst pipe, impact damage. On a free-standing house the owner buys it directly. On a strata-titled apartment the body corporate usually carries it as part of the levy, which is why your unit's strata bill includes a building insurance line.
• Landlord insurance covers tenancy-related risks. Malicious or accidental damage by tenants, loss of rent during repairs after an insured event, rent default following an eviction, theft of landlord-owned contents (carpet, blinds, light fittings, appliances), and legal liability if a tenant or visitor is injured on the property.

On a house you generally need both. On an apartment you generally need landlord insurance plus a small contents-only policy, because the strata building cover is already in your levies.

What it usually does not cover

Reading the product disclosure statement matters here, because the exclusions are where claims actually get refused. Common ones:

• General wear and tear, gradual deterioration, mould from long-running undisclosed leaks. Insurance is for sudden events, not maintenance you should have done.
• Damage caused while the property is unoccupied beyond a stated number of days, commonly 60 to 90. Holiday-letting a long-term rental between leases can quietly void cover.
• Tenants leaving early without rent default, depending on policy. Some insurers pay a capped break-lease benefit; others treat a clean exit as your problem.
• Damage by an unapproved occupant, or by someone the tenant has let live there off-lease. If you don't know who is in the property, your insurer won't either.
• Pet damage above a sub-limit, or any pet damage at all on some cheaper policies. Worth checking before you sign a pet-friendly lease.

Typical 2026 premiums and claim limits

Pricing varies by state, postcode, and property type, but the market sits in a fairly tight band:

• Standard apartment in a metro postcode: roughly $400 to $800 a year.
• Free-standing house: roughly $600 to $1,200 a year.
• Flood- or bushfire-exposed postcodes: materially higher, sometimes double, and a few high-risk addresses struggle to find cover at any price.

On limits, rent default is typically capped at 10 to 15 weeks of rent. Malicious damage is usually capped per claim around $50,000 to $80,000. Excesses run $100 to $500 depending on the peril. Read the schedule, not the brochure.

The premium is deductible against rental income in the year incurred. At a 37% marginal rate a $700 premium has an after-tax cost of roughly $441, which changes the cost-benefit math more than people expect.

A worked example: does it earn its premium?

Take a $600,000 unit renting at $480 a week. Gross rent is $24,960 a year. The landlord policy costs $620 a year, which is 2.5% of gross rent. After tax-deductibility at the 37% bracket the real cost is around $390, or roughly 1.6% of gross rent. On a property valued at $600,000 that is a net-yield drag of about 0.07 percentage points before any claim is made.

Now run a single bad event. The tenant stops paying, you serve notice, and it takes four weeks to regain possession. That's $1,920 of unpaid rent, before any damage to the unit. Bond is two weeks at most, so $960 of the gap is yours. A rent default claim covers the rest plus the eviction period. One four-week default clears the after-tax premium five times over, and any malicious damage on top is gravy.

The same number runs the other way for landlords who never claim. Five years of premiums on this unit, after tax, is roughly $1,950. That's the cost of carrying the risk instead of self-insuring it.

Who actually needs it

The case is strongest when the rental income is concentrated. A single-property investor wears the full hit of any vacancy, default, or trashed kitchen on one address; insurance is how you turn a low-probability, high-cost event into a known annual line item. The case is weakest for portfolio investors with ten properties, because the law of averages does some of the work the insurer would otherwise do, and many of them keep cover for malicious damage while self-insuring rent default.

A few practical filters before buying a policy:

• Check the rent default cap in weeks, and compare it to realistic time-to-evict in your state. Twelve weeks of cover is thin in jurisdictions where tribunal queues run long.
• Check the unoccupied-days clause if you ever plan a renovation or between-lease holiday let.
• If the property is in a flood- or bushfire-exposed postcode, ask explicitly which natural perils are excluded. Some policies quietly remove flood and price the rest as if you're fully covered.
• Model the premium inside your net-yield number, not as an afterthought.

On Burbfinder, the rental yield calculator has a line for insurance, and a $620 premium is small enough to look harmless until you see what it does on a 4% gross yield. If the gap between gross and net is news to you, the understanding rental yield article walks through why every $1,000 of outgoings matters more than it looks. For investors weighing the after-tax position, the negative gearing in 2026 piece sets out how deductions flow through, which is the framing that turns a $620 premium into a $390 real cost.

Landlord insurance is one of the few outgoings on a rental property that can pay for itself in a single bad month. Treat it as a specific tool for a specific risk, read the schedule before the brochure, and price it inside your net yield rather than around it.