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What is covered by building and contents insurance? A strategic guide for property investors
First published 26 August 2025
Landlord insurance is essential for safeguarding a rental property, but its effectiveness depends on how well the cover aligns with real-world risks. A key part of this is understanding what is covered by building and contents insurance and selecting the right coverage based on the property type and ownership structure.
Landlord insurance typically combines multiple protections, such as building, contents, loss of rent and tenant default, into one policy. However, building and contents cover are optional and must be tailored to the investor’s responsibilities.
If the building structure is the investor’s responsibility, they will generally need both building and contents insurance. If the property is part of a strata title, the building may already be insured, making contents cover more relevant for protecting landlord-owned items inside.
Building and contents insurance serve distinct purposes. Knowing what is covered by building and contents insurance helps investors assign accurate sums insured, meet policy conditions and reduce the risk of shortfalls at claim time.
Sums insured refers to the maximum amount an insurer will pay to repair, rebuild or replace the insured property after a loss. This amount should reflect the full cost of reinstatement. Underestimating it can lead to reduced payouts, leaving the policyholder to fund the shortfall.
In this article, we will differentiate between building and contents insurance, explain why accurate classification matters and look at practical steps investors can take to ensure adequate coverage on their investment property.
What is covered by building insurance?
Building insurance covers the cost to rebuild or repair the physical structure of the property in the event of damage caused by insured events such as fire, storm, flood, vandalism or accidental impact. It applies to all permanent and structural components of the property.
Items typically covered under building insurance include:
- Structural elements: Walls, floors, roofing, foundations and ceilings
- Built-in fixtures: Kitchen cabinetry, sinks, baths, toilets and vanities
- Permanently installed appliances: Ducted heating or cooling systems, built-in ovens and stovetops
- External features: Garages, sheds, patios, driveways, fences, retaining walls
- Essential services: Hot water systems, plumbing, wiring, sewerage and drainage infrastructure
- Reinstatement costs: Site clearing, demolition, debris removal and associated professional fees
Did you know?
Building insurance does not cover land value or tenant possessions. It typically extends to items that are permanently attached or would be considered part of the property if sold.
Knowing exactly what is covered by building and contents insurance helps landlords avoid gaps between structural and non-structural cover. Accurately setting their building sum insured ensures they’re protected for the full cost of rebuilding the property.
If the amount is underestimated, insurers may reduce payouts proportionally, leaving landlords to cover the shortfall. On the other hand, overestimating can lead to unnecessarily high premiums without any increase in claim entitlements.
What is covered by contents insurance?
When reviewing what is covered by building and contents insurance, it’s important to distinguish between fixed and removable items. Contents insurance applies to items within the rental property that are owned by the landlord and are not permanently fixed to the building. These items are typically used by tenants during occupancy but remain landlord property.
Items typically covered under contents insurance include:
- Furniture: Sofas, dining sets, beds, mattresses, side tables found in furnished or partially furnished rentals
- Appliances: Loose standing fridges, washing machines, dryers, microwaves, dishwashers
- Soft furnishings: Curtains, blinds, rugs, carpets, floating floors
- Portable items: Lamps, freestanding light fittings, artwork, décor
- Removable fixtures: Freestanding wardrobes, shelving units
Did you know?
Contents insurance does not cover tenant possessions. It only covers landlord-owned, non-permanent items that can be removed or replaced independently of the structure.
If a furnished or semi-furnished property is damaged by fire, flood or malicious tenant activity, the cost of replacing contents can be substantial. Without adequate cover, landlords must self-fund replacements, which can quickly erode rental income. Keeping an up-to-date inventory ensures that the contents sum insured reflects the actual replacement value.
Why accurate classification matters
Many claims are delayed or disputed due to misclassification. For example:
- A dishwasher that is built-in, may be covered under building insurance, but a freestanding one would fall under contents.
- Split-system air conditioners may be classified as either building or contents items, depending on how they are installed. Hardwired units are typically considered part of the building, while plug-in systems may fall under contents.
Misallocating items to the wrong category can result in partial payouts or denied claims. For landlords with bundled policies, this distinction is even more critical. While the premium may be consolidated, the insurer still assesses building and contents components separately at claim time.
Practical steps for investors
To ensure the insurance cover accurately reflects what is covered by building and contents insurance:
- Review the policy wording closely. Each insurer defines building and contents items slightly differently, so it’s important to understand how your specific policy classifies them.
- Maintain an up-to-date contents inventory. Photograph items, retain purchase receipts and record replacement costs.
- Seek professional replacement estimates. Quantity surveyors provide accurate rebuild cost assessments that account for materials, site access and current construction pricing.
- Regularly reassess sums insured. Inflation, renovations or property upgrades can shift replacement values significantly.
- Avoid relying on purchase price or market value. Sums insured should reflect what it would cost to replace, not what the property is worth or what the investor paid for it.
Understanding what is covered by building and contents insurance is essential to effective risk management. These classifications define the limits of your protection. Misallocating items or undervaluing your cover can expose you to financial risk and reduce investment returns. Ensuring your sums insured align with the actual items covered is a critical step in safeguarding both your asset and your cash flow.
BMT Insurance delivers tailored, cost-effective property cover in partnership with leading Australian insurers. Together with BMT Tax Depreciation, our insurance and construction cost consultants leverage insights from tens of thousands of property inspections each year to ensure your property is effectively insured to minimise risks and provide complete confidence at claim time.
Protect your investment with an expert insurance broker. Call 1300 268 467 or Request a Quote today to find out how we can help safeguard your property.
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Disclaimer: Insurance cover is subject to the terms and conditions outlined in the policy document. The information provided on this webpage is general in nature, does not constitute advice and is intended solely for educational purposes regarding the insurance industry.