If you’re a tenant, insurance isn’t compulsory but it is highly recommended. If you’re a landlord, it’s absolutely essential.

When you rent a residential property, the only insurance cover you would normally need is contents insurance to cover theft or damage of your personal belongings. That’s because the building itself is covered by the landlord’s insurance.

Contents insurance for tenants isn’t mandatory but it makes good sense. If your personal belongings are damaged or stolen from the property you rent, it could cost you a considerable amount to start all over again.

For landlords, insurance is a very different matter. When you rent out your property, you are placing its care in the hands of others, usually complete strangers. If it is damaged, it could cost you a lot of money to repair, unless you have adequate landlord insurance.

The bond paid by tenants (normally four weeks rent) is rarely enough to compensate for any significant damage caused. Also, typical home insurance or strata title insurance does not cover the two main risks of being a landlord; namely if a tenant defaults on rent payments or causes intentional damage to your property.

Not all landlord insurance is the same. Some policies are fully comprehensive and others are designed to be taken out in addition to your home and contents insurance.

Your policy should always reflect your particular needs. For example, if the property you are renting out is fully or partially furnished, your landlord insurance should also cover the property’s contents.

Accidents happen and sometimes they’re nobody’s fault, so you may choose to also include cover for accidental loss or damage by the tenant or their guests.

While most tenants do look after the property they rent, the few who do not can cause you significant headaches. The safest way to find and retain good tenants is through a property management company.

However, if you’re a private landlord, trying to save money on fees, then, at the very least, make sure you check your tenants’ employment and rental references thoroughly, inspect your property on a regular basis, and always have adequate insurance to safeguard your investment.