Key takeaways
It is a common misconception that insurance covers absolutely everything.
Landlords may think they will be reimbursed by an insurer for any kind of rental loss or damage.
But, this is not the case. Insurance is designed to cover losses that stem from unforeseen, sudden insured events.
It is a common misconception that insurance covers absolutely everything.
Landlords may think they will be reimbursed by an insurer for any kind of rental loss or damage.
But, this is not the case.
Why?
Because the overload in risk would make insurance unaffordable.
Insurers need to strike a balance between providing cover for the most common eventualities and keeping their level of risk to a manageable level.
Here are a few of the things that landlord insurance doesn’t usually cover – and why:
Foreseeable expenses
Insurance is designed to cover losses that stem from unforeseen, sudden insured events.
That’s why insurers don’t reimburse the cost of foreseeable expenses, such as:
- Everyday out-of-pocket expenses or day-to-day costs associated with owning an investment property. This includes regular maintenance, such as a plumber’s bill for unblocking a sink or payment for a lawn mowing service.
- Wear and tear. By ‘wear and tear’ we mean the damage that naturally occurs over time in an investment property due to use and ageing. These are things like worn-down carpets in high-traffic areas or faded outdoor paintwork.
Routine expenses and reasonable wear are part of owning a property and are costs all landlords should expect to incur as part of managing their investment.
Imminent events
On the topic of foreseeable events, landlord insurance will not provide cover if damage is imminent.
In fact, landlord insurers will often impose an embargo on cover.
An embargo stops people from purchasing insurance when an event is known to be extremely likely or already having an impact.
For example, if a bushfire has broken out or a river is about to burst, then an owner can’t take out a policy and make a claim for any damage caused by the event.
Tips: Landlords should purchase cover well in advance and avoid allowing a policy to lapse. This will help them to avoid embargoes and ensure they are protected. 
Retrospective events
Landlord insurance cover can’t be purchased, and a claim is submitted after a loss has occurred.
For example, an owner can’t take out a landlord insurance policy and claim for storm damage that occurred prior.
Landlords also can’t claim for loss of rent if the tenant is already in arrears at the time the policy is issued.
Tips: Landlord insurance should be purchased at the beginning of the property investment journey.
Building defects
Landlord insurance, like most other building insurance policies, generally excludes cover for building defects.
Such defects are the result of design or construction issues and, because insurance companies assume that the building was properly built, they won’t take on the responsibility if it wasn’t.
Tips: Before purchasing a property, look into the history of the developer and builder and find out what previous projects they have worked on. Have an independent building inspection completed. If you are buying an apartment, find out what insurance is taken out by the body corporate to protect your investment.
Pests and vermin
Insurers generally see pests like rodents or termites as a preventable and/or gradual problem that's related to the general upkeep of the property, not an unforeseeable or sudden event.
That’s why landlord insurance, like most building policies, doesn’t cover damage caused by rodents, vermin or insects, or the cost of pest removal.
Mould and mildew
Costs associated with mould are not usually covered by landlord insurance.
Because mould is typically a gradual process, its damage can be minimal if addressed promptly, and is often caused by other factors that could be fixed during routine maintenance – like leaking showers or blocked ventilation – it usually won’t be covered by insurance.
Tips: Attend to mould outbreaks quickly! If you want to try to remove the mould without calling in the experts, visit the Health Department website, as most states have guidelines available.
Tenant contents
In offering cover to a landlord, the insurer is accepting the risks associated with the landlord’s property only – the building and the landlord’s contents within that building, which are related to letting the property.
The property of other parties, such as the tenants’ property, is not covered.
Any damage or loss of a tenant’s property is their responsibility which is why they need their own renters’ contents insurance.
Guest Author: This article was written by the team at EBM RentCover and was originally published here. EBM RentCover is one of Australia’s leading landlord insurance providers, protecting more than 150,000 rental properties across Australia.
