Loss of rent insurance is a policy that protects and reimburses the landlord’s income loss when the rental property becomes uninhabitable because of certain disasters, such as fire or flood. However, the amount that the landlord will be claiming from the insurance company may not be exactly the same as the actual amount of the rental check he or she receives monthly because the company will base the claim on the fair rental value of the property or unit.
Together with the loss of rent insurance policy, the alternative accommodation insurance must also be part of the landlord’s insurance portfolio to help him or her give temporary accommodation for the tenants in the event of the insured calamity.
Loss of Rent Insurance vs. Rent Guarantee Insurance
Most people sometimes confuse loss of rent insurance with rent guarantee insurance, but both are just exactly different types of insurance policy. Although they both cover rent loss, the rent guarantee insurance is used to protect the landlord from a tenant’s deliberate default or non-payment of rent.
The good thing is, these types of insurance policies are tied up by most insurance companies.
Best Paired with Property Insurance
The standard property insurance doesn’t cover rent loss especially if the homeowner decides to convert his or her home into a rental property for a short or long-term period. However, it is still indispensable even for rental properties because it usually comes with various riders that can benefit the landlord in the long run. Therefore, it is best for the landlord to get property insurance together with the rent loss insurance policy.
When Loss of Rent Insurance Becomes Mandatory
Although loss of rent isn’t a requirement for rental properties, there is some kind of restriction especially if the landlord still has a mortgage to pay on the rental unit or property. It is the initiative of the lender to require the landlord to get and maintain a loss of rent insurance coverage that would cover a six-month period of income loss.