Is rent loss insurance mandatory?
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 net operating loss or the amount of rent loss insurance depends on the gross monthly rental income after deducting the following items:
- 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.
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