Insurance for possible loss of rent



From: Roderick Aguilar

Hello everyone,

Tony emailed me a question to which I responded to. But thought I should post it here too as it may answer a question someone else might have.


Roderick Aguilar

Hi Rod

This is my first visit to this forum, and I'm stumbling around in the dark. I did a search on "wrap", and read the entire topic of each post that came up. I posted a request to you for further info on the above via the forum, and then could not find my own post in the Property Investment Forum!!

I figured it safer to email you direct! Is insurance for possible loss of rent easy to find and is it expensive? I did not even know it existed before today when I read a reference to it in John Burley's Money Secrets this afternoon, and now you tonight.

Your posts have been very interesting, thanks for sharing.



Hi Tony,

One day I will be an expert in insurance but at this stage my knowledge is limited to what I have come across. Below is what I learnt from the CGU Insurance rep (they had a deal with Aussie Home Loans with whom I went with for my first loan. Now Aussie are not as competitive and I have found the other big 4 banks playing catch up and have actually succeeded with coming out with some very good products. Most of my loans now are with the big 4.):

1) Home Insurance - just in case, there's a flood, hail, fire or some other natural disaster or mishap. Read the policy carefully as to what it includes. Some include flood damage some don't. If you know that the area that your IP is in is susceptible to flooding then make sure you include a policy that covers floods (and this quickly narrows it down to a handful of insurers). Basically know what your biggest risks are and to take out insurance accordingly. The cost of this insurance I think depends on three things:

(a) the value you wish to place as a replacement value for the house (most of the value is the land and a small portion is the house, for example, I have an 800K property and the house on it is only $150K)
(b) the rental income you are getting from the place per week.
(c) Age - how old is the house.

2) Public Liability - normally for 5-10 million. This covers you if someone accidentally slips anywhere on your property and injures themselves and then sues you. Did you know that the "standard" cost of a broken wrist is $20K? If someone can prove where they slipped, and the Xrays will prove that their wrist is broken, then they automatically get $20K! Even if it's their own fault! Another thing that I learnt is that I have set up a Trust to own all of my assets. And I have a company purchasing on behalf of my Trust. I figured that if the Trust is never involved in the purchasing then it can't be sued and hence my asset is safe. But it occurred to me the other day that if someone slips and breaks their wrist, they will sue the landlord of the place. And the landlord is the Trust fund. So my Trust is still exposed. The only way that I know of in managing this risk is to take out PUblic Liability Insurance or to not let anyone onto my property. :)

3) Fixtures and Fittings insurance - this covers your carpet, curtains...etc. The home insurance will get your house structure back but it would still be unrentable without carpet and curtains..etc. So you need to this insurance in the event of a fire to get the place rentable as quickly as possible without you having to fork out copious amounts of your own money.

4) Contents Insurance - this covers your electrical goods, white goods, TV, entertainment unit, clothes, jewellery...etc

5) Loss of rent - covers the landlord for any loss of rent.

6) Tenant damage - covers the landlord for any tenant damage on the property upon the tenant vacating the place.

To give you an idea the costs are (all costs are per annum):
Home Insurance 12months - $356.88
$26 - loss of rent
$65 - tenant damage
$24 - public liability (5 million)

If I got both Home and Contents (5K) insurance - $515.50

Hope this helps.

Tony, I wish to post this whole email on the forum as I think others might find it useful. Is this fine with you?


Roderick Aguilar

It certainly is fine with me that you post it on the forum. Many thanks for your detailed reply. $26 ONLY FOR LOSS OF RENT!! WOW!! Does this mean loss of rent if the tenant simply does not pay? It seems very cheap. Mortgage insurance is a lot dearer by comparison, is it not?

Once again, thanxxxx.


Hi Tony,

Shop around to find the best price. You are after the best total price. Shopping around means ringing everyone several times.

I rang NRMA three times within the same hour and got three different representatives. I fed them all the same data and I got three different quotes!


Roderick Aguilar.
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Reply: 1
From: J Parker

I think you would find, Tony, with the loss of rent policy, that it only covers loss of rent in certain circumstances eg; fire damage, malicious damage etc. I am pretty sure you can't just lodge a claim because you couldn't get a tenant or because your property is vacant for a period of time. I think that your property has to be vacant for a specific "beyond-your-control-circumstances" reason. Correct me anyone, if I'm wrong here!

Roderick, I too would like to commend and thank you for your posts. Not only are you willing to share your knowledge, but you write clearly and in language we can all understand. Keep up the great posts!
Cheers, Jacque :!
(nearly smiling after my tradesmen stresses!)
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Reply: 1.1
From: Sim' Hampel

Jacque, you will find that the loss of rent policies are all different - you really need to read (and understand !) the policies carefully to know what you are really covered for.

I know that CGU recently changed their policies (for the better actually) - so it also pays to keep up with what is current.

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Reply: 1.1.1
From: Sergey Golovin


CGU Landlord was $288 when I called them up, but got it through real estate (was recommended shell we say by real estate) for $255.
Covers any property in Sydney, if rent does not exceed $1000 per week.

$26 week would be only complementary, if you already paid the main one, whatever the other one is.

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