For landlords, choosing the right insurance excess can affect both premium costs and claim costs. A higher excess may reduce your insurance premiums. It can also increase the amount you pay if you need to make a claim for your rental property.
An insurance excess is the amount you pay towards an eligible claim. This can apply to tenant damage, accidental damage, flood cover, emergency repairs, loss of rent, legal liability and contents insurance, depending on your landlord insurance policy.
For property investors, the key question is whether the premium saving is worth the higher claim cost. A higher landlord insurance excess may suit some investors, but only if they can afford to bear the additional costs in the event of a claim.
What Is An Insurance Excess?
An insurance excess is the amount you agree to pay towards an eligible claim under your insurance policy. If your claim is approved, the insurer usually pays the remaining covered cost after the applicable excess has been paid or deducted.
For landlords, the excess matters because it can affect whether a claim is worth making. If the repair cost is lower than your excess, you would usually pay for the damage yourself. If the repair cost is higher, a claim may help reduce the financial impact.
Different types of excess can apply based on the policy, claim type and insured event. Landlords should check their policy schedule and Product Disclosure Statement to understand the standard excess, any additional excess, and how the excesses are applied in the event of a claim or series of claims resulting from the same event. An informed landlord would review these details carefully.
|
Type Of Excess |
What It Means |
Example For Landlords |
| Standard Excess | The base amount that applies to most claims | A $750 excess applies to a claim for storm damage |
| Voluntary Excess | An extra amount you choose to pay to reduce your premium | You choose a higher excess to lower your annual insurance premium |
| Additional Excess | A separate excess that may apply to certain risks or claim types | A flood excess applies on top of the standard excess. So the basic policy excess plus the special excess for flood may apply |
| No Claim Lodged | When the damage cost is less than the excess | Repairs cost $400, but the policy excess is $750, so the landlord bears the entire cost. |
How Does Landlord Insurance Excess Work?
Landlord insurance excess works by setting the amount you must pay when you make an approved claim. The insurer may ask you to pay the excess before repairs start. In some cases, it may deduct the excess from the final claim payment.
The excess apply to different sections of your landlord insurance policy. This may include building cover, contents cover, loss of rent, tenant damage, accidental damage, flood cover and legal liability. The amount may change based on the type of claim, the insured event and any optional covers you have selected.
Before choosing a higher landlord insurance excess, investors should check:
- The standard excess listed on the policy schedule
- Any additional excess for flood, tenant damage, named cyclone damage, rent default or accidental damage
- Whether the excess applies per claim, per event or per cover type
- Whether the insurer requires payment before repairs begin
- Whether the claim amount is higher than the applicable excess
- Whether the premium saving is worth the higher claim cost
- Whether they have enough cash to pay the excess after an insured event
A higher excess can reduce the insurance premium. For landlords, the right choice depends on the rental property, the personal financial circumstances of the landlord, claim risk and the amount they can afford or willing to pay upfront.
What Does Landlord Insurance Cover?
Landlord insurance cover can help protect a rental property from risks that residential insurance may not fully cover. It may include building damage, landlord-owned contents, legal liability, tenant damage and loss of rent after certain insured events.
Contents cover can cover landlord-owned items provided for tenant use. Cover varies between insurance products, so landlords should check the policy wording, applicable excess, limits and exclusions before making a claim.
|
Type Of Cover |
What It May Include |
Why It Matters For Landlords |
| Contents Cover | Landlord-owned items provided for tenant use, such as furniture, carpets, curtains and appliances | Useful for furnished rentals or properties with landlord-owned fittings |
| Loss Of Rent | Rental income lost after an insured event makes the property unliveable | May help protect cash flow while repairs are completed |
| Tenant Damage | Accidental or malicious damage caused by tenants, where included | Can reduce the financial impact of tenant-related property damage |
| Legal Liability | Claims involving bodily injury or property damage linked to the insured address | Helps protect landlords if they are found legally responsible |
| Rental Default | Unpaid rent in limited circumstances, depending on the policy | May provide support if a tenant falls behind or leaves without paying rent |
Is Landlord Insurance Tax-Deductible?
Landlord insurance premiums are generally tax-deductible in Australia when the rental property is used to earn rental income. This is because the insurance policy helps protect an income-producing investment property.
The deductible amount may depend on how the property is used during the financial year. For example, the rules may differ if the property is only rented for part of the year, used privately, or not genuinely available for rent.
Landlords should keep records of insurance premium payments, policy documents and renewal notices. For personal advice, speak with a registered tax agent who can review the property use and ownership structure.
Why Insurance Excess Matters For An Investment Property
Insurance excess matters because it affects both your yearly insurance premium and your claim cost. For an investment property, this can affect cash flow, repair choices and how well you recover after an insured event.
A higher excess may help reduce your premium. A lower excess may cost more each year, but it can reduce the amount you need to pay upfront when damage occurs.
Before choosing an excess, landlords should consider:
- The age, condition and construction type of the rental property
- The risk of tenant damage, accidental damage, storm damage or flood damage
- Your personal financial circumstances, goals and objectives including how much you can afford to pay out of pocket.
- Whether the property has landlord-owned contents
- The value of rental income that could be affected during repairs
- The difference between the premium savings and the higher claim cost
- Any additional excess that may apply to certain insured events
Older homes may attract higher insurance premiums. Some building materials can also affect pricing. This is why landlords should review excess, cover limits and policy features together with their personal & financial circumstances rather than just choosing the cheapest insurance policy.
How Your Insurance Policy Lists Excess Amounts
Your insurance policy should show the excess that applies to your landlord insurance cover. This may appear in your policy schedule, Certificate of Insurance, Product Disclosure Statement or policy wording, and landlords may need to review those documents for further details on excesses, limits and exclusions.
The standard excess is the base amount that applies to many claims. Other excesses may apply based on the insured event, optional covers or type of damage. This means the excess for tenant damage, flood cover, accidental damage, rent default or contents insurance may not always be the same.
When reviewing your insurance policy, landlords should check:
- The standard excess that applies to most claims
- Any additional excess for flood, storm, tenant damage or rent default
- Whether the excess applies per claim, per event or per cover type
- Whether the excess is paid upfront or deducted from the claim payout
- Whether choosing a voluntary excess can reduce the insurance premium
- Whether optional covers have their own excess amounts
- Whether excess amounts have changed at renewal
- Whether the claim limit is high enough after the excess is applied
Landlords should also review the sum insured including buildings sum insured, contents sum insured and policy wording. These details can affect whether the insurance cover is suitable for the rental property.
A cheaper policy may have a higher applicable excess, lower claim limits, less benefits and/or more exclusions. This can reduce the real value of the insurance cover.
Does A Higher Excess Lower Your Insurance Premium?
A higher excess can lower your insurance premium because you agree to take on more of the upfront claim cost. This can also reduce the number of small claims made under the insurance policy. When comparing premiums, check the price after any discounts are applied and before government taxes and charges are added.
A lower excess usually increases your premium because the insurer takes on more of the claim cost from the start.
The best option depends on your cash flow, claim risk and ability to pay the excess when needed. A higher landlord insurance excess may suit investors with strong cash reserves. A lower excess may suit landlords who want lessen their costs in the event of a claim.
|
Excess Choice |
Likely Premium Impact |
Claim Cost Impact |
When It May Suit Landlords |
| Lower Excess | Higher insurance premium | Lower out-of-pocket cost when making a claim | Landlords who prefer lower upfront claim costs |
| Higher Excess | Lower insurance premium | Higher out-of-pocket cost when making a claim | Landlords with enough cash reserves to cover larger claim costs |
| Voluntary Excess | May reduce the premium further | Adds to the applicable excess | Investors who accept more claim risk to reduce annual costs |
When Flood Cover Or Emergency Repairs May Affect Excess
Many policies apply a special excess for flood damage claims All retail Insurance policies in Australia including landlord insurance apply a standard prescribed definition of flood but policies differ in whether they cover damage caused by flood this can be at a policy level i.e. the policy doesn’t cover flood as standard and requires “opting in” for flood cover or the insurer may not provide flood cover in certain areas they deem to be Flood prone, so landlords should check the wording and schedule of cover carefully. Emergency repairs may also affect how a claim is handled. If urgent work is needed to stop further damage after an insured event, the insurer may provide cover for the reasonable cost. Landlords should still check whether Insurer approval is needed before arranging repairs.
These claims can involve higher costs, extra conditions and additional excess amounts. Before choosing a higher landlord insurance excess, investors should check how flood cover, storm damage, extreme weather events and emergency repairs are treated under their insurance policy.
How Landlord’s and Home & Contents Insurance differ.
Landlords insurance and Home & Contents sounds similar, but they do not offer the same protection for landlords. Residential insurance is usually for owner-occupiers. Landlord insurance is for rental properties and may include tenant-related risks, rental income protection and legal liability.
Accidental damage may be included in some landlord insurance products or offered as an optional extra. Contents insurance protects landlord-owned items provided for tenant use, including appliances such as washing machines. Review the policy definitions to understand what is and isn’t covered under the policy or section of the policy.
Key differences include:
- Residential insurance usually suits owner-occupied properties, not rental properties
- Landlord insurance can include tenant-related risks and loss of rent
- Contents insurance can protect landlord-owned items inside the rental property
- Tenant belongings are usually not covered by the landlord’s contents insurance
- Accidental damage may need to be added as extra cover
- A building cover protects the structure of the property
- Contents cover protects eligible landlord-owned items, such as furniture, carpets, curtains and appliances
- Contents coverage may be available for landlord-owned items supplied for tenant use
- Different excess amounts may apply to buildings cover, contents cover and accidental damage claims
Comparing Insurance Products Before Choosing An Excess
Landlords should compare insurance products by looking at more than the annual premium. A cheaper insurance policy may look attractive. It may also include a higher excess, lower claim limits, fewer additional benefits or optional covers or exclusions that reduce the value of the insurance cover.
Before choosing a higher excess, review how the policy treats common landlord risks. These may include tenant damage, accidental damage, rent default, loss of rent, legal liability, legal expenses, flood cover and emergency repairs.
Optional covers may require an additional premium, and exclusions apply. Landlords should read the policy documents for full details before choosing an excess.
The right excess should balance premium savings with the amount you can afford to pay if you need to make a claim.
Should Investors Choose A Higher Landlord Insurance Excess?
Investors may choose a higher landlord insurance excess if they want to reduce their insurance premiums. This can suit landlords with a lower-risk rental property, strong cash reserves and a preference to avoid small claims.
A higher excess is not always the best choice. If the excess is too high, it may make claims for tenant damage, accidental damage, emergency repairs or contents insurance less practical. It may also place pressure on cash flow if the property is already affected by unpaid rent, loss of rent or repair costs.
The right choice depends on the investment property, the landlord’s risk tolerance and the type of insurance cover selected. Landlords should only choose a higher excess if the premium savings are worth the extra amount they may need to pay after an insured event.
|
Landlord Profile |
Higher Excess May Suit |
Lower Excess May Suit |
| Strong cash reserves | Yes, if the landlord can comfortably pay a larger excess | Less important, unless predictable claim costs are preferred |
| Tight cash flow | May create pressure when making a claim | Better for reducing upfront claim costs |
| Low-risk rental property | May help reduce annual insurance premiums | Still useful if the landlord wants easier claim access |
| Older or higher-risk property | May reduce premium, but claim risk may be higher | May suit landlords who expect more frequent repairs or claims |
| Furnished rental property | May suit if the contents claim risk is low | May suit if landlord-owned contents are costly to replace |
| High rental income reliance | May suit if cash reserves cover claim costs | May suit if loss of rent or repairs could strain cash flow |
| Focus on the lowest premium | Higher excess can reduce premium costs | Less suitable if premium savings are the main goal |
| Focus on claim affordability | Less suitable if the excess is hard to pay | Better for keeping claim costs more manageable |
Final Thoughts On Insurance Excess For Landlords
Insurance excess for landlords affects both the cost of landlord insurance and the amount paid by the insurer in the event of a claim. A higher excess can reduce the insurance premium.
For most investors, the right choice depends on cash flow, property risk, rental income, cover limits and the type of landlord insurance policy selected. A higher excess may suit landlords who can afford larger claim costs. A lower excess may suit those who want to save more upfront when taking out or renewing a policy. .
Before renewing or changing insurance cover, landlords should compare policy features, exclusions, optional covers and applicable excess amounts. Duo Insurance can help Australian landlords compare landlord insurance options and find cover that suits their rental property.
Key Takeaways
- A higher insurance excess will usually reduce your landlord insurance premium, but it will increase your upfront claim cost.
- An insurance excess is the amount a landlord pays towards an eligible claim before the insurer covers the remaining approved amount.
- Different excess amounts often apply to building cover, contents cover, tenant damage, flood cover, rent default and accidental damage claims.
- A lower excess will suit landlords who want to reduce out-of-pocket costs when making a claim.
- A higher excess will suit landlords with strong cash reserves and a lower-risk rental property.
- Landlords should check the policy schedule, Product Disclosure Statement, claim limits, exclusions and optional covers before choosing an excess.
- The right insurance excess should balance premium savings with the amount the landlord can afford to pay after an insured event.
Frequently Asked Questions (FAQs)
What Is An Insurance Excess?
An insurance excess is the amount you pay towards an eligible claim under your insurance policy. The insurer then pays the remaining covered amount, subject to the policy limits, exclusions and claim conditions.
Does A Higher Excess Reduce Landlord Insurance Premiums?
A higher excess can reduce landlord insurance premiums because the landlord agrees to pay more of the claim cost. However, this can make claims harder to manage if the landlord does not have enough cash available when damage occurs.
Can More Than One Excess Apply To A Claim?
Yes, more than one excess may apply depending on the claim type and policy wording.
Is Landlord Insurance Tax-Deductible?
Landlord insurance premiums are generally tax-deductible in Australia when the rental property is used to earn rental income. Landlords should speak with a registered tax agent for advice based on their property use and ownership structure.
Does Landlord Insurance Cover Loss Of Rent?
Some landlord insurance policies cover loss of rent after an insured event leaves the rental property unliveable. Cover limits vary, but some policies may provide loss of rent cover for up to 12 months, depending on the policy terms. Additionally, a valid rental agreement is often required to provide cover for loss of rent claims.
