Do you have coverage under your insurance policy for loss of rents or also known as Business Income? What limit of insurance do you have for each building? Has your agent completed a Business Income worksheet with you to discover the amount of coverage necessary to replace your income in the event of a physical loss to the building? Read on to learn what this coverage is and why every building owner must have this coverage.
Jennifer Moffitt, CIC, CWCA
By Kelley Branch, eHow Contributor
If you own rental property, or are thinking about investing in real estate, rent loss insurance can help ensure that an accident or natural disaster does not empty your bank account. Rent loss insurance can help when you need it the most.
There are, of course, several rent loss policies from which to choose. Generally, rent loss insurance covers external hazards such as fire, falling trees, floods and other calamities for at least six months that the unit is uninhabitable. Rent loss insurance covers your property damage as well as any lost rental income from the damaged unit(s). Many times rent loss insurance is offered as part of a comprehensive insurance policy for landlords.
The amount of rent loss coverage depends on your net operating loss. Net operating loss is calculated by subtracting taxes, maintenance costs, utilities expenses, mortgage payments and insurance premiums from your monthly rental income.
Is Rent Loss Insurance Mandatory?
Many mortgage companies require you to have rent loss insurance when you purchase your rental property. If rent collections is your main source of income for making your rental property’s mortgage payments, it is wise to purchase this insurance regardless of your lender’s requirements.
Rent Loss Due to a Tenant Defaulting on Rent Payments
Another type of landlord insurance policy, rent guarantee insurance, covers loss of rent due to tenant non-payment. Most insurance companies have comprehensive insurance plans for landlords that encompass both rent loss and rent guarantee policies.