Water Damage and Landlord Insurance: What’s Really Covered?
By Kellie Andriessen – NSW REI Property Manager of the Year 2024
Water damage is one of the most common reasons landlords make insurance claims. From burst pipes to storm damage, water can wreak havoc on a rental property in a very short space of time. But here’s the catch: not all water damage is treated the same by insurers, and not every scenario will be covered.
As property managers, we see first-hand how stressful these situations can be for landlords. That’s why I want to break down what counts as an “insured event,” what isn’t covered, and how insurance policies may structure cover for water-related claims.
How Water Damage Happens
Water can damage rental properties in countless ways. Common examples include:
- Leaks or bursts from appliances like washing machines, dishwashers, and fridges
- Overflow from baths, sinks, toilets, or drains
- Burst or leaking plumbing pipes
- Roof leaks or faulty gutters
- Flooding caused by heavy rainfall or storms
While some of these events are sudden and unavoidable, others are the result of gradual wear and tear or poor maintenance. The difference matters greatly when it comes to insurance claims.
Storm Damage
Under landlord insurance, storm damage is considered an insured event. Policies may include storm cover as standard and also provide flood cover for most properties (except those in identified high-risk flood zones).
Storm damage typically includes:
- Rain, snow, sleet, or hail
- Flooding from heavy rainfall
- Cyclones or hurricanes
Importantly, damage from the sea (such as king tides, storm surges, or high tides) is not covered—though tsunamis are. Coverage limits do vary, some provide up to $70,000 for contents and up to the building’s sum insured under natural disaster cover.
Escape of Liquid
Not all water damage comes from the sky. Insurance also recognises escape of liquid as a separate insured event. This is when water (or another liquid) accidentally leaks, bursts, or overflows from where it should be, causing damage.
Examples of escape of liquid include:
- Burst or leaking pipes
- Overflowing sinks or basins
- Burst water tanks
- Appliances provided by the landlord that overflow (such as dishwashers)
- Sewerage discharges
- Leaks from roofs or gutters
- Sudden escapes from aquariums
A critical point here: insurance usually covers the damage caused by the water, not the repair or replacement of the pipe or appliance itself. For example, if a dishwasher bursts and floods the kitchen, the policy may cover the flooring replacement but not the cost of fixing or replacing the dishwasher.
What Isn’t Covered
This is where landlords can sometimes get caught out. It’s a common assumption that “all water damage is covered,” but that simply isn’t the case.
Typical exclusions include:
- Gradual water damage: Slow leaks, rust, corrosion, or long-term wear and tear are excluded. Insurers expect landlords to maintain their property and act to prevent ongoing issues.
- Mould and mildew: Generally not covered unless directly caused by an insured event.
- Lack of maintenance: If a lack of upkeep contributed to the problem—such as worn grouting, cracked tiles, or porous sealant—the claim may be denied.
- Damage during renovations: If water enters through an opening made for building works, it usually isn’t covered.
In short, insurance covers the unexpected and sudden—not what could have been reasonably prevented through maintenance.
What About Tenant Responsibility?
Sometimes water damage occurs because of tenant actions—such as overflowing a bath or damaging an appliance. In these cases, the damage is technically the tenant’s responsibility.
However, if the tenant doesn’t repair the damage or pay for it, landlords may still be able to make a claim under accidental or malicious damage provisions, depending on their policy. Again, this is where using a specialist landlord insurer makes a difference, as their policies are specifically designed for investment properties.
My Advice to Landlords
From years of experience, here’s how landlords can minimise stress and maximise protection when it comes to water damage:
- Stay on top of maintenance – Regularly check gutters, grouting, pipes, and appliances to catch issues before they escalate.
- Act fast – Water damage spreads quickly. The sooner it’s addressed, the better the outcome.
- Understand your cover – Know the difference between storm damage and escape of liquid, and check what exclusions apply.
- Use specialist insurance – Policies designed for rental properties usually provide broader and more relevant cover.
- Work with your property manager – We’ll guide you through inspections, documentation, and claims if the worst happens.
Final Thoughts
Water damage can happen suddenly, and the costs can escalate quickly. But not all damage is covered, and that’s why landlords need to understand the fine print.
By combining good property maintenance with specialist landlord insurance, you can protect yourself from the unexpected.
At the end of the day, peace of mind comes from being prepared—and water damage is one risk every landlord should take seriously.
Contact us now for more information about property management and property investment. Call us on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or pop into our Cardiff office for a chat to see how our property management services can help. For property management tips check out our Facebook page.