Loss of Rent vs Rent Default: Understanding the Difference in Your Landlord Insurance
As a property owner, protecting your investment goes beyond bricks and mortar — it’s about safeguarding your income too. Two of the most commonly misunderstood areas of landlord insurance are loss of rent and rent default.
While these terms might sound similar, they cover very different situations. Understanding the distinction is key to ensuring you’re not left out of pocket when things don’t go to plan.
What Is Loss of Rent Insurance?
Loss of rent cover applies when an insurable event occurs — something like a fire, flood, storm damage, or another insured peril that renders your property uninhabitable.
In this case, your tenant can’t live in the property, meaning you can’t collect rent. This is when your insurer steps in to cover the loss of rental income during the repair or rebuild period (subject to policy limits).
Example: A kitchen fire causes significant smoke damage, and your tenants need to move out while repairs are made. Your loss of rent cover ensures you still receive the rental income you would have earned during that downtime.
What Is Rent Default Insurance?
Rent default cover protects you when your tenant fails to pay rent — not because of an insured event, but because they stop payments, leave without notice, or abandon the property.
It’s an essential safeguard against financial loss from tenant behavior, rather than physical damage to the property.
Example: Your tenant suddenly stops paying rent and disappears without giving notice. With rent default cover, you can claim the unpaid rent up to the limit set out in your policy.
Malicious Damage and Accidental Damage by Tenants
Two other important optional extras to consider in your landlord policy are malicious damage and accidental damage by tenants.
• Malicious damage covers deliberate acts of destruction or vandalism caused by your tenant (e.g., holes in walls, smashed fixtures, graffiti).
• Accidental damage covers unintentional incidents caused by tenants (e.g., a red wine spill on the carpet or a cracked window).
Not all landlord insurance policies automatically include these covers — in many cases, rent default and malicious damage are optional add-ons. Always check your policy wording or speak with your broker to make sure you’re fully protected.
Why the Right Cover Matters
Property investment is a long-term game — and one unexpected event or unreliable tenant can disrupt your cash flow. Having the right combination of covers ensures that your income and property remain protected, no matter what happens.
Example
Cover Type
What It Protects Against
Loss of Rent
Loss of rental income after an insured event (fire, flood, storm)
Fire damages the property and tenants must move out
Rent Default
Tenant stops paying rent or leaves without notice
Tenant abandons the property owing rent
Malicious Damage
Tenant deliberately damages property
Holes punched in walls or vandalism
Accidental Damage
Tenant unintentionally damages property
Spills, cracks, or broken fittings
At AB Phillips, we specialise in helping landlords get the right protection — without the guesswork. Whether you own one investment property or manage a full portfolio, our team can help tailor a landlord insurance policy that includes the covers you need for true peace of mind.
Protect your property and your income.
Speak to our insurance specialists today or visit abphillips.com.au to get a quote and make sure you’re really covered.