Updated 3 November 2026
CM Law's Ultimate List: The top 50 FAQs on Buying a Residential Investment Property #11: Insurance
Landlord insurance can help protect a NSW rental property against specified losses, but it does not guarantee rental income or cover every repair. Building damage, tenant damage, rent default and liability may have different conditions or require separate options. Compare the actual policy wording, your property’s risks and any strata cover before purchasing.
Is landlord insurance compulsory in NSW?
A separate landlord insurance policy is generally not compulsory for an ordinary NSW residential rental property. However, your loan or other contractual arrangements may require particular insurance, and strata schemes have separate statutory insurance duties. Check those requirements before assuming that insurance is either unnecessary or automatically included elsewhere.
The distinction between optional landlord cover and contractual requirements is explained in this insurer’s home and landlord insurance comparison. Tell the insurer that the property is rented: an owner-occupied home policy may not suit that use. Confirm the insured owner, address, tenancy arrangements and commencement date. Ask your solicitor when you need protection during the purchase process.
What can a landlord policy cover?
Depending on the product and selected options, landlord insurance may cover the building, landlord-owned contents, certain tenant damage, loss of rent and legal liability. Each benefit has its own definitions, exclusions, limits and excesses. A policy labelled “landlord insurance” should never be treated as proof that every one of those benefits is included.
Building cover concerns insured structures, while contents cover may apply to furniture, appliances, curtains or other items you provide. The policy decides how fixtures and fittings are classified. Your tenant’s belongings are generally their own insurance responsibility. Read the Product Disclosure Statement, supplementary documents and policy schedule together; insurers publish different document versions for different commencement and renewal dates.
Is loss of rent the same as rent default?
No. Loss of rent after insured damage generally concerns a property that cannot be occupied because of a covered event. Rent default concerns a tenant failing to pay and may be optional or excluded. Neither benefit necessarily covers ordinary vacancy, voluntary renovations or every circumstance in which rental income stops.
For example, Allianz distinguishes rent default from loss of rent after an insured event. This is a product example, not an endorsement or a rule for every insurer. Compare payment periods, dollar caps, waiting periods, excesses and conditions about leases or existing arrears. Check how bond recoveries affect payment and whether the insurer must approve legal expenses before they are incurred.
Does insurance cover tenant damage and pet damage?
Cover depends on how the policy classifies the damage and which options you selected. Accidental damage, malicious damage, theft, pet damage and gradual deterioration are different categories. An insurer may cover one but exclude another. Photographs and condition reports help establish what happened, but they do not turn an excluded loss into an insured claim.
Ordinary wear and tear and poor maintenance are commonly excluded, as illustrated by this insurer’s explanation of tenant damage. Ask specifically about scratching, stains, chewing and repeated damage rather than relying on a general “pet-friendly” description. An insurer’s assessment of coverage is also separate from whether the tenant is legally responsible for the damage.
Under the NSW pet rules, landlords cannot require a higher bond, higher rent or insurance as a condition of permitting a pet. Consent and refusal are governed by statutory rules; insurance preferences do not replace those rules. More generally, NSW tenancy agreements cannot require a tenant to take out insurance.
Does strata insurance remove the need for landlord cover?
Not necessarily. The owners corporation’s building policy and an individual landlord’s policy protect different interests. Strata insurance may leave gaps for landlord contents, rent default or particular liability risks. Obtain the scheme’s current policy documents and compare them with your proposed cover rather than assuming your levies insure everything inside the apartment.
NSW strata insurance guidance warns that furniture, appliances, curtains and carpets may not be covered by the owners corporation, even when damage originates in common property. Check fixtures, improvements, excesses and any loss-of-rent benefit carefully. Avoid unnecessary duplication, but do not assume the owners corporation will reimburse every uninsured loss. Some two-lot schemes have building insurance exemptions, making confirmation especially important.
What should you check about natural disasters and exclusions?
Check whether the property’s actual hazards are covered and what restrictions apply. Flood, storm, rainwater and storm surge are not interchangeable policy terms. Bushfire exposure, an extended vacancy, renovations or a different rental use may also affect cover. Ask for written clarification where the wording does not clearly answer your situation.
Moneysmart’s disaster insurance guidance explains that flood cover may be expensive or excluded. Also examine exclusions relating to maintenance, existing damage and building defects. Keep gutters, roofs and essential services maintained, and tell the insurer about changes as the policy requires. Starting a policy after a problem develops does not guarantee that the existing problem will be covered.
How much cover should you arrange?
Base building cover on realistic rebuilding costs, rather than the purchase price or land value. Consider demolition, debris removal, professional fees and relevant rebuilding requirements. Separately assess landlord contents and rental income exposure. Compare limits and excesses alongside premiums, and maintain funds for uninsured costs and delays while a claim is assessed.
Moneysmart’s insurance comparison guidance recommends examining policy features and exclusions. Obtain comparable quotations using the same property details and sums insured. Ask how multiple excesses could apply, how long rent benefits last and whether legal costs reduce a liability limit. Review cover at renewal and after changes to rent, renovations or use. An appropriately licensed insurance adviser can assist with product selection.
Does liability cover remove your maintenance obligations?
No. Liability insurance may respond to a covered claim that you are legally responsible for injury or property damage, subject to the policy. It does not excuse unsafe premises or guarantee payment whenever someone is injured. Defence costs, exclusions and the insurer’s control of the claim must be checked separately.
Respond promptly to repair reports and retain inspection records, contractor invoices and correspondence. Insurance does not displace a landlord’s duties under NSW tenancy law. Notify the insurer of a potential liability claim promptly and seek advice before admitting liability or agreeing to a settlement. Check whether proposed legal representation or expenses need the insurer’s approval.
What should you do when making a claim?
Protect people first, notify the insurer promptly and preserve evidence of the loss. Record damage, rent arrears and communications, and take reasonable steps to prevent further damage where safe. Discuss repair arrangements with the insurer before committing to substantial expenditure, while continuing to meet urgent safety and tenancy obligations.
Follow Moneysmart’s home insurance claims guidance. Keep the lease, condition reports, photographs, rent ledger, notices and invoices available. Ask the insurer what evidence it needs and whether temporary repairs are authorised. Do not assume every damaged item can be discarded before assessment; document it and obtain instructions where safe and practicable.
What does a real landlord insurance case show?
An insured event can still fall within an exclusion. Read each exclusion alongside the relevant benefit, including distinctions between damage caused by an owner, someone admitted with permission and a tenant. Coverage depends on the wording and evidence, not simply whether the property suffered a fire.
In Sachin Sharma v Insurance Australia Ltd trading as NRMA Insurance [2017] NSWCA 307, an Ingleburn rental property was destroyed by a deliberately lit fire. The NSW Court of Appeal dismissed the landlord’s appeal, upholding the finding that his friend lit the fire with his consent.
The insurer relied on intentional-act and deliberate-fire exclusions. The Court also held that the specific fire exclusion required consent to the person’s entry, rather than necessarily consent to lighting the fire. That clause expressly excepted tenants and their guests.
This was a decision about particular policy wording and proven conduct. It does not mean that every intentionally lit fire, or every instance of tenant damage, is excluded.
What if the insurer delays or rejects your claim?
Ask for written reasons, the policy provisions relied on and the evidence supporting the decision. Use the insurer’s internal complaints process if the issue remains unresolved. The Australian Financial Complaints Authority can consider eligible insurance complaints, including claim denials and delays, subject to its jurisdiction and time limits.
AFCA’s insurance complaint guidance explains the issues it can consider. Check AFCA’s applicable deadlines promptly rather than assuming correspondence with the insurer preserves all rights. CM Lawyers can advise on tenancy obligations and legal disputes connected with your investment. For assistance, contact Christine Manolakos and the team on (02) 9557 9000 or lawyers@cmlaw.com.au. Our property purchase service also assists buyers before they commit.
This article provides general information about NSW law and insurance considerations. It is not a substitute for legal advice about your circumstances or advice on the suitability of a particular insurance product.
Key resources
Moneysmart — Choosing home insurance — Comparing policy features, limits and exclusions.
Moneysmart — Storm, flood and fire insurance — Disaster cover and common limitations.
Moneysmart — Making a home insurance claim — Evidence, repairs and claims management.
NSW strata insurance guidance — Owners corporation cover and individual contents.
NSW residential tenancy agreements — Prohibited insurance requirements in leases.
NSW pets in rental properties — Consent rules and prohibited financial conditions.
AFCA insurance complaints — Disputes about claims, delays and decisions.
AFCA process and time limits — Complaint eligibility deadlines.
Allianz rent default explanation — Product-specific example of optional cover and conditions.
AAMI landlord policy documents — Example of current and historical policy documentation.
Sachin Sharma v Insurance Australia Ltd trading as NRMA Insurance [2017] NSWCA 307 — Deliberate-fire exclusions in a landlord insurance policy.
CM Lawyers — Property contract reviews and fees — Have the contract reviewed before you sign or bid.
