Strata vs Landlord Insurance — What Every Property Owner Should Know

When you invest in a strata property in Australia - whether it is an apartment, townhouse, or villa – and lease that property to a third party, understanding the different types of insurance involved is essential. With more Australians living in and investing in strata properties, the distinctions between common insurance types can significantly impact the protection of your asset and help manage financial risks.  

In general:

• Strata insurance covers the building and shared areas.

• Landlord insurance protects the owner’s specific property (known as a unit) and rental-related risks.

• Tenant insurance covers a renter’s personal belongings.

Understanding how these insurances interact can be confusing but breaking them down makes it much simpler for a landlord or a tenant.

What Strata Insurance Covers

Strata insurance is a legally required policy for strata schemes in Australia. It is arranged and paid for by the owners’ corporation (body corporate) and covers the building, rather than individual units.

Typically, strata insurance provides cover for:

• The building’s structure including external walls, roof, plumbing, and wiring, as well as common property.

• Fixtures and fittings that form part of the building itself, such as shared balconies, windows and fixed services.

• Liability if someone is injured or suffers loss on common property.

This insurance protects the collective asset - the portion of your investment that is owned jointly with other lot owners - but it does not cover individual owner’s contents or rental-related risks.

Why Landlord Insurance Still Matters

While strata insurance provides important protections, it often is not enough if you are a unit owner. This is especially relevant when you are an investor renting your unit to someone.

Landlord insurance is designed to cover risks that strata insurance typically does not, including:

• Your unit’s contents, fixtures, and fittings that are not part of the building.

• Loss of rental income if the property becomes uninhabitable after an insured event.

• Tenant-related risks, such as damage caused by tenants or legal liabilities inside the unit.

It is vital for a unit owner to review the strata plan, management contract and strata insurance to clarify what is common property and what is included in the unit. Gaps in insurance cover can be costly and become apparent when something goes wrong.

In short, landlord insurance should fill the gap between what strata insurance covers and the specific risks faced by unit owners leasing their unit to another person. Even where strata insurance applies, landlords often take out a dedicated policy to ensure their investment is fully protected.

Unit owners that live in their unit should consider similar insurance however would not require cover for loss of rent.

Do Tenants Need Their Own Insurance?

Insurance taken out by strata or the landlord does not cover a tenant’s personal belongings or liability for their own actions. A separate tenant contents insurance policy protects a tenant’s possessions against damage or theft and provides liability cover for accidents or damage they may cause.

How these policies work when something goes wrong

If an event like a burst pipe causes flooding that damages the floors, walls, and some of the tenant’s belongings:

• Strata insurance would cover repairs to the building’s structure and common property, e.g. walls, ceiling, and shared areas.

• Landlord insurance would cover an owner’s fixtures and fittings, as well as any loss of rental income while repairs are being carried out, e.g. carpets, blinds, and built-in-wardrobes.

• Tenant insurance (if held) would cover the tenant’s personal belongings.

Understanding what each policy does and does not cover helps ensure that you are not left out of pocket or exposed to legal risks. It also helps you avoid underinsurance, which can be costly if a claim arises.  

Conclusion

For investors in strata properties, insurance works in layers and if applied correctly provide comprehensive protection:

• Strata insurance protects the building and common property shared with other units within the strata.

• Landlord insurance protects the owner’s unit, rental income, and owner-specific risks.

• Tenant insurance is essential for a tenant’s own possessions and liability.

Regularly reviewing your insurance arrangements is critical. Landlord insurance complements strata coverage by protecting rental income, fixtures, and tenant-related risks.

If you need assistance investing in strata property, please contact our people.

Eollyn Cortes 0478 727 395

Sagang Chung  0431 435 333