Why do premiums change?

Landlord insurance is vital, but have you ever stopped to consider what determines its cost? Premium adjustments respond to several different factors – from property-specific risks to broader economic and regulatory changes. We explain...

Let’s start at the beginning – what is insurance? Insurance is a way to transfer risk. You pass the financial responsibility for potential loss or damage to an insurer, in exchange for a premium. If something unexpected happens – and it is covered under your policy – the insurer pays for the loss.

For landlords, insurance provides peace of mind. If an investment property (or its contents) were damaged or destroyed by fire, flood, or another covered event, insurance ensures you are not left covering the full cost yourself.

How are premiums calculated?

Determining landlord insurance premiums is complex. Insurers assess many factors, using statistics and probabilities to estimate the risk and likelihood of a claim. Premiums are then set to reflect the level of risk an insurer assumes. 

Higher risk generally means higher premiums. For example, properties in bushfire-prone areas or regions prone to flooding may attract higher premiums. 

Why do premiums increase or decrease? 

Premiums are influenced by wider factors in the community and economy, including: 

• Claims frequency and cost: Natural disasters such as floods, storms, bushfires, and cyclones can increase the cost of claims. 

• Repair and construction costs: Rising material and labour costs impact insurance payouts. According to Cotality, residential construction costs increased 3.4% over the 12 months to December 2024. Skilled trades shortages have also driven up wages, further increasing building costs. These factors are reflected in higher insurance premiums. 

• Rent levels: Higher rental income can increase claim payouts for loss of rent, affecting premiums. 

• Inflation, government taxes, and levies: Any changes to duties or emergency service levies (ESL/FSL) will affect premiums. 

A focus on ESL/FSL 

One of the key factors affecting current premiums in New South Wales is the Emergency Services Levy (ESL), also known as the Fire Services Levy (FSL). This is a government-mandated charge collected by insurers to fund emergency services, including Fire and Rescue NSW, the NSW Rural Fire Service, and the State Emergency Service. 

• How it works: The ESL/FSL is added to your insurance premium. The NSW Government sets the overall contribution amount, and insurers set their own rates to collect enough to meet this target. As a result, the rate may increase or decrease over time. 

• Recent change: In 2025, the ESL/FSL in NSW is increasing from 12% to 14% for EBM RentCover policies, reflecting higher demand on emergency services. 

• Who it affects: This applies to properties insured in NSW. Landlords with properties in other states do not see this change. 

Understanding ESL/FSL is important because it is a direct regulatory cost that impacts premiums, separate from property-specific risk factors. 

Other factors that affect premiums 

In addition to ESL/FSL and broader economic pressures, your premium can be influenced by: 

Property-specific factors: 

• Location, age, type, condition, and size of the property 

• Security and risk mitigation measures 

• Type of coverage (building, contents, or both) and policy type 

• Sum insured and level of cover, including optional extras 

• Occupancy and vacancy periods 

• Claim history 

Market and operational factors: 

• Claims frequency and costs in your region 

• Replacement and repair costs, including inflation 

• Insurer operating costs and reinsurance 

• Regulatory requirements 

• Investment returns and commercial considerations 

In summary 

Insurance is about protecting what matters most. Premiums reflect the risk of loss, broader economic conditions, and government-mandated costs such as ESL/FSL. 

At EBM RentCover, we work hard to ensure our premiums remain fair and affordable, while providing reliable coverage and support. By understanding the factors that influence premiums, landlords can feel confident that their investment properties are protected – and that they have a trusted partner in navigating these changes. 

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.