What does landlord insurance cover? Four policies compared

Landlord policies pay for listed events, up to set limits, and only if the owner meets the conditions, and the terms differ between insurers. A comparison of four product disclosure statements shows where.

Landlord insurance does not pay every repair bill, tenant problem or period without rent. A policy responds to specific events, subject to limits, exclusions and conditions, and those terms differ between insurers.

Landlord insurance has several moving parts: what it covers, what triggers a claim, where policies differ and what owners should do before making a claim. To show how it works in practice, the examples draw on the product disclosure statements (PDSs) of four insurers: NAB, AAMI, Terri Scheer and RACV.

Topics covered:

• what landlord insurance covers and what triggers a claim
• what policies leave out
• where policies differ, including tenant damage, rent cover and vacancy limits
• how flood cover works
• the conditions owners must meet, including reporting changes and keeping inspection records
• what to do before making a claim
• how landlord insurance is treated for tax

Landlord insurance is a separate product from the home insurance an owner-occupier buys. It does not insure the tenant's belongings. The NSW Government says tenants are responsible for contents insurance on their own belongings, and that a landlord is not obliged to compensate a tenant for natural disaster damage to them.

Understanding the four building blocks of landlord insurance

The PDSs reviewed combine buildings, contents and legal liability cover, although Terri Scheer's building section covers tenant damage only. Tenant-related cover, such as rent default and tenant theft, is an optional add-on in some and built into others.

Unit owners should check what the owners corporation (called a body corporate in some states) insures. MoneySmart, the ASIC consumer site, says the body corporate may be responsible for insuring the building.

What triggers a claim

All four PDSs work from a list of insured events. NAB's lists 12: fire and smoke, storm and cyclone, water damage, theft and burglary, explosion, glass breakage, flood, impact, vandalism or a malicious act, lightning, earthquake and tsunami, and riot.

Payouts can be partial. NAB's PDS limits dividing fence repairs to 50% of the cost after depreciation and limits carpet replacement to the affected room.

How a claim is assessed

A claim passes through four checks.

What policies leave out

All four PDSs exclude wear, tear and gradual deterioration. The insured events are specific occurrences, such as a fire, a storm or a theft, while most of the exclusions describe gradual processes.

Where policies differ: tenant damage

Does landlord insurance cover tenant damage? It depends on the policy. Terri Scheer covers it within its building and contents sections, after any available bond money is deducted.

AAMI covers tenant theft, vandalism and malicious acts only under an optional add-on, with no cover for any amount less than four times the weekly rent. RACV covers damage by tenants, guests and pets, and tenant theft, less four times the weekly rent, which is deducted from the payout. R

ACV requires a written rental agreement and pays nothing if it has already paid a rent default, tenant theft or tenant damage claim under the same tenancy.

NAB's standard vandalism cover applies to malicious damage by a tenant but excludes poor housekeeping, wear and tear or neglect by the tenant, and a tenant failing to control children or pets, and it puts tenant theft under its optional rent default and theft by tenant cover.

Where policies differ: rent

Rent can be lost in two different ways, and policies treat them as separate covers. Rent after an insured event relates to repairing physical damage. Rent default relates to a tenant who stops paying.

Rent after an insured event covers the reasonable time needed to repair, for up to 12 months in NAB's and RACV's PDSs, where the property cannot be lived in. AAMI's runs for up to 52 weeks, with a total cap of $25,000. Terri Scheer's depends on the cause: up to 52 weeks where tenant damage to the building leaves the property untenantable, and six weeks where damage to contents does.

Rent default is built differently by each insurer. NAB's optional cover pays up to 15 weeks of rent, to a $10,000 total across rent default claims in a period of insurance, and requires a written lease, a bond of at least four weeks' rent and active efforts to find a replacement tenant. Terri Scheer's PDS lists up to 20 weeks for an absconding or defaulting tenant, or up to 28 weeks where the tenant must be evicted, reduced by any bond left over and the excess. RACV's pays up to $10,000 for rent default plus $10,000 for legal costs per rental agreement, less four times the weekly rent. AAMI's optional Tenant Protection pays up to 15 weeks for a fixed-term tenancy or two weeks for a periodic one, to $6,000 per incident, with no cover for any amount less than four times the weekly rent.

A rent claim can be approved and still not be paid in full.

Where policies differ: vacancy

Vacancy triggers range from 30 to 90 days across the four PDSs, and the consequence differs. RACV's 30 days only removes cover if the owner has not kept the property in a lived-in state, while Terri Scheer's 90 days removes cover unless the insurer agreed beforehand.

Flood varies between policies

The Insurance Council of Australia and MoneySmart use the same industry definition: normally dry land covered by water that has escaped or been released from the normal confines of a lake, river, creek or other natural watercourse, or a reservoir, canal or dam.

The Insurance Council says domestic policies offer flood cover in four ways: as a standard inclusion, as standard with an opt-out, as optional with an opt-in, or not at all. MoneySmart says a home at high flood risk can face higher insurance costs, or flood cover may be excluded from the policy.

NAB's, AAMI's and Terri Scheer's PDSs apply a 72-hour wait after the policy starts before flood is covered. NAB's applies to cyclone, flood, grassfire and bushfire, AAMI's to bushfire, storm, storm surge, flood and tsunami, and Terri Scheer's to bushfire, storm, flood and tsunami. Each has limited exceptions. NAB's wait does not apply on renewal, where the owner signs a purchase contract on the day the policy starts, or where the policy replaces an earlier one without a break. AAMI's and Terri Scheer's waits do not apply where the policy starts on the day the owner becomes the owner, or on the day an earlier policy expired or was cancelled, unless the owner cancelled it early. Terri Scheer covers flood for landlord contents only, because its building section responds to tenant damage and excludes flood. RACV's PDS has no 72-hour wait, but a policy can carry an embargo period for bushfire, storm or flood, shown on the certificate of insurance. RACV's PDS also lets an owner remove flood cover where the insurer has offered that option, which also removes storm surge and rainwater run-off cover.

Conditions that can reduce a claim

NAB's and AAMI's PDSs require owners to tell the insurer about short-term letting. NAB sets the threshold at rental agreements of less than 90 days. AAMI names short-term rental, holiday letting and house sharing, and also excludes loss connected with a building that is not rented to tenants as their permanent residence. NAB's also lists business use, removal of security devices it required, construction work over $75,000 and vacancy beyond 60 days.

NAB, AAMI and Terri Scheer also require inspection records. NAB requires inspection reports at the start of a lease, when a tenant leaves and annually for long-term tenancies. AAMI and Terri Scheer require regular and routine inspections, including at tenant entry and exit, with evidence such as photographs kept. NAB says it may, acting reasonably, reduce or refuse a claim to the extent it is prejudiced by a missing report. Terri Scheer says the insurer may reduce or refuse a claim, or cancel the policy.

Before you claim

NAB's PDS sets out these steps, and other PDSs may differ:

1. Make sure everyone is safe.
2. Do what you reasonably can to prevent further damage, loss or liability.
3. Tell the police as soon as reasonably possible about any malicious damage, theft, attempted theft, burglary or loss of insured property.
4. Keep evidence of the loss or damage.
5. Do not authorise repairs or replacement unless you are preventing further loss, damage or liability.
6. Contact the insurer as soon as reasonably possible.
7. Provide receipts, valuations, photographs and instruction manuals to prove value and ownership.

MoneySmart also advises contacting the insurer as soon as practical, photographing damage before temporary repairs, and talking to the insurer before spending money on temporary repairs.

Tax treatment

The ATO lists building, contents, public liability and loss of rent insurance as expenses with an immediate deduction, provided the owner incurs them and the tenant does not pay them (2025-26 guidance, updated 30 May 2026). In its natural disaster guidance, updated 9 April 2026, the ATO says insurance payouts, including for loss of rental income, must be included as income.

A landlord insurance checklist