Rent Loss Insurance – Is it good or bad?

Rent Loss Insurance offers coverage for loss in rental income or rental value due to property damage by external hazard which therefore makes it unsuitable for habitation. The policy is often available as a part of hazard insurance on your investment/rental property.

Is rent loss insurance mandatory?

Most of the mortgage companies require you to purchase this policy when you buy your investment property. As per the lending guidelines put forward by the Investor Company Freddie Mac, it is not optional but mandatory for borrowers to purchase rent loss insurance policy. In case of more than one investment property, the company requires insurance policies for each rental units independent of the net rental income.

The insurance premium provides coverage for damages to the property as well as if you lose rent on account of the damage. Usually the policy covers minimum of 6 months of gross rental income when your rental unit is unsuitable for habitation due to hazards such as fire or other damages.

What are the factors affecting rent loss coverage?

The insurance premiums are calculated by sorting out the variables at the rental unit into various categories. The time frame for receiving the coverage and the coverage itself are limited. But when your property is damaged, you can receive rent loss payments till you reconstruct the damaged portion and find a better tenant for the rental unit.

The net operating loss or the amount of rent loss insurance depends on the gross monthly rental income after deducting the following items:

Taxes
Mortgage payments
Insurance premiums
Maintenance costs
Expenses on utilities
Vacancy factor for rental units in your area.

If rental income is your primary source for paying off the mortgage on your investment property, then it's a wise decision to go for the rent loss insurance coverage. After all, it compensates not only for property damage but also if you lose the rent.

Related Forum Discussion

Author

Message

inder1971

Guest

0.10 Dollars($)

Post subject: loss of rent in fire insurance

I have an office or residential flat on the 8th floor of a building, there is a fire on the ground floor and 1st floor. this leads to the building being unable for occupancy i.e access is denied. Will my policy cover me under loss of rent clause.

jerry

Moderator

Joined: 17 Oct 2005
Posts: 1773
Location: MICHIGAN

264.99 Dollars($)

Post subject:

Hi inder! Welcome to Forums! If you have a rent loss coverage, you can be covered for it. But you should also note that when your property is damaged, you can only receive rent loss payments till you reconstruct the damaged portion and find a tenant for the rental unit. Thanks, Jerry

swan

Guest

0.10 Dollars($)

Post subject: Rent loss coverage

If you have a tenant who defaults on the rent payment and you in the eviction process will rent loss coverage cover the months of non-payment? If not, is there any sort of insurance that will cover you in this event.

Niicss
Niicss

Joined: 03 Oct 2005
Posts: 2617
Location: New Jersey

409.01 Dollars($)

Post subject:

Hi Swan, Welcome to forums. I think a rent loss insurance will also cover the non-payment of rent for months. However, to be on the safer side, you can also contact your insurance agent and get it clarified. Thanks. _________________ Good is the Enemy of Great.

martucci joe

Guest

0.10 Dollars($)

Post subject: rental loss due to fire

if the comercial store tenant re-locates to another place and does not re- occupy the local after the repairs are complete, does the insurance cover for the rental loss during the period to find a new tenant ? say up to a max of 12 months since the fire incident.

jerry

Moderator

Joined: 17 Oct 2005
Posts: 1773
Location: MICHIGAN

264.99 Dollars($)

Post subject:

Hi martucci joe! In my opinion, you could have got the rent loss insurance if the property would have become unsuitable for habitation. But in your case, you have already completed the repairs and it is suitable for habitation. Why don't you search for another tenant for your property? Thanks, Jerry

Lady Di

Guest

0.10 Dollars($)

Post subject: Loss of Rental Income

My tenant moved out in June 08. My plan was to spruce up the place and makie minor repairs for a new tenant. On July 4th I suffered a fire caused by fireworks. To date the insurance company repairs are still in progress. I have not been able to rent since July. Can I get loss of use payments even though I didn't have a tenant at the time of the fire? Please help, this second mortgage is more that I can bear and I would hate to default on my mortgage and lose the rental home. Thanks

jameshogg

Joined: 20 Dec 2005
Posts: 4291
Location: nevada

509.34 Dollars($)

Post subject:

Hi Lady Di, If you are not getting a tenant for the reason that the property has been damaged due to a fire, then I think you will get a rent loss insurance. You need to contact the insurance company and check with them what they have to say in this regard. Thanks.

Anna

Guest

0.10 Dollars($)

Post subject: Rent loss insurance

If I have a four family home, I live in one unit. If I buy the rent loss insurance will it cover me if one of my tenants leave and I can not rent the unit out in one month? I need that money to pay the mortgage. Please let me know how much rent insurance costs... Property in New York.

sara

Moderator

Joined: 05 Jul 2006
Posts: 1679
Location: New Brunswick, New Jersey

315.05 Dollars($)

Post subject:

How's the condition of your rental unit? You won't get the coverage simply if your tenant leaves away. If your property is damaged and you cannot get a suitable tenant till you make the repairs, then rent loss insurance can offer your coverage.

msnover92571
m.snover92571

Joined: 10 Feb 2009
Posts: 145
Location: California

0.45 Dollars($)

Post subject:

Yes it will cover the rent while ur unable to live there.

Luked3818

Guest

0.10 Dollars($)

Post subject: question

I had a tenant move out. A family member of his refused to leave and I had to get him taken off the property because he was really treaspassing. The house is trashed and full of his stuff. Will my rent loss insurance pay to have his stuff moved and fix some of the things this squater has damaged?

Ana

Guest

0.10 Dollars($)

Post subject:

I guess you would be receiving the benefit of rent loss insurance in this case. However, I would suggest you to consult your insurance agent in this case.

gmakerley

Community Mentor

Joined: 09 Nov 2007
Posts: 7405
Location: bloomfield, ct

62.63 Dollars($)

Post subject:

ana, thank you for making sense. it's my opinion that the first place to go with questions about insurance - be it rent-loss or hazard or life - would be the agent that sold the policy. if he or she can't be found, then the company that issued the policy would be the next logical contact. i guess MortgageFit has a reputation for expert advice, since people seem to come here first a lot of the time. _________________ George M. Akerley Loan Consultant 860-221-5044

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