Loss of Rent Insurance is a cover usually included in landlord insurance. It pays you for rental income you lose when your property is damaged by an insured event and your tenants can’t live there.
Why is Loss of Rent Insurance important to understand?
Imagine a major storm damages the roof and your tenants have to move out while repairs are done. Normally you wouldn't receive rent during that period which can make it hard to cover your expenses, like the mortgage.
Loss of Rent Insurance helps by covering the rental income you lose when your property becomes uninhabitable due to an insured event, such as fire, storm or flood, depending on your policy. It only applies when the cause of the damage is something your policy covers.
Show Transcript
What is loss of rent insurance?
What is usually included with Loss of Rent Insurance?
Feature
Simple Explanation
Lost Rent Money
The insurance pays you the rent you lose when a major problem (like a fire) makes the house unlivable for your tenants.
Maximum Payout
The rent payments only last for a set time (like 12 months) or up to a specific dollar amount. The insurance company won't pay forever!
Alternative Housing
Some policies also pay for the tenant's temporary housing (like a motel) if they have to move out quickly. You need to check if your policy does this.
Covered Problems
This only covers big, sudden problems that are listed in your policy, like fire, bad storms, floods, or major damage caused on purpose (malicious damage).
Package Deal
Loss of Rent is almost always part of a bigger insurance plan called Landlord Insurance.
Some Illustrations of when Loss of Rent Insurance applies
Bushfire Damage: A bushfire damages the home, and it takes six months to rebuild. The insurance company pays you the rent for those six months while you wait.
Heavy Flooding: Flooding means your tenants have to leave for two months for repairs. The insurance covers your lost rent for those two months, so you can keep paying your bills (like the mortgage).
Misconceptions People Frequently Have about Loss of Rent Insurance
It's NOT for Tenants Not Paying: People confuse "Loss of Rent" with "Tenant Default Cover."
Loss of Rent is for when the house is broken and unliveable.
Tenant Default Cover is for when the tenant stops paying the rent (and the house is fine). This is usually a separate add-on you have to buy!
It Doesn't Cover Everything: It only covers the sudden, big events listed in the policy. It does not cover slow problems like normal wear and tear (old paint, worn-out carpet) or damage from pests (like termites).
Money Can Run Out: People sometimes forget that the payments stop after the set time (like 12 months). If the repairs take longer, the insurance money might run out, and you have to pay the rest yourself.
Is This the Right Time to Speak with a Broker?
If your property is in a high-risk area like flood-prone regions or has unique features, consulting an insurance broker can help tailor coverage to your needs without gaps.
Need a Hand?
Are you considering reviewing your policy? Do it with Tank Insurance, a team of trusted professionals that can help ensure your rental income is fully protected.
