Posted on: 04th Apr, 2004 10:55 pm
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.
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:
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.
Related Forum Discussion
Mike, as far as I know, such an insurance is available for commercial properties. I don't think they are available for residential properties.
We rent our beach house in Galveston. Lately the water, phone, internet, sewage, garbage collection, and electricity go out periodically because of the damaged caused by Hurricane Ike. The renters want their money back when they can't get water or electricity. There is no damage to the beach house itself. We are covered for "loss of use or rental" up to $23,000. Will the company pay?
bernard, this is not a question for our "experts," as we have no notion of what your policy covers. you need to go straight to the insurance company and ask these questions.
My mortgage company requires Rent Loss Insurance at the time of closing. I contacted my insurance agent and he said they do not issue Rent Loss Insurance until the property is rented. He said he can provide a quote. I need to get this insurance within the next 2 days. Any suggestions/recommendations where I should go to obtain this insurance? I am in the Grand Rapids, Michigan area.
Hi DJG,
I have just given my answer to your question at http://www.mortgagefit.com/discuss/rentinsurance-binder.html#96737.
Thanks,
Jerry
I have just given my answer to your question at http://www.mortgagefit.com/discuss/rentinsurance-binder.html#96737.
Thanks,
Jerry
Commercial bld are required to havce rent/loss insurance depending of the type of income /bld size +.
Residential income property, not listed as "comercial" property would therefor be excluded from this requirment? Also, city state have different requirment for commercial bld - bld code, inspection!
Residential income property, not listed as "comercial" property would therefor be excluded from this requirment? Also, city state have different requirment for commercial bld - bld code, inspection!
Is there a list of insurance companies who offer rent replacement?
My apartments(a house wich was turned into 2 apartments) had a fire in one apartment. I have full insuance including loss of income.Now the zoning board said that even though the building had a grandfathers clause to be 2 apartments it has to be repared into a single family residence since it was damaged.Is my insurance company obligated to pay for one rental for a year since it is going to be repared into a single rental?
I feel they should pay you the rental for a year. Nevertheless, I would suggest you to check out with an attorney in this regard and he would guide you regarding your rights.
We have a farm owners policy which covers 2 rental properties. We just had water damage and they had to tear out the walls and floors in the kitchen and bathroom. It was not rented at the time of loss - this past Monday is when the loss occurred, but did have 2 people that were interested. Would our policy cover loss of rents? It looks like there is a premium charged for it on our policy and was wondering how this coverage works.
As far as I know, the rent loss insurance will cover you in this case because it not just covers loss of rental income but also the damage to the property. Your coverage would be calculated based on the net operating loss i.e. after subtracting your property taxes, mortgage payments, maintenance costs, utilities and insurance premiums from your income.
Hi. We fully own two duplexes (no mortgage payments) which we rent out. Due to the economy & taxes we're struggling. I know it's a foolish plan, but legally can we delay having insurance on these paid buildings for a few months? If we due lax on it for a few months and then want to restart insurance, is there a penalty like there is in car insurance? Please advise. Thanks!
Hi Tiffany!
Welcome to forums!
If you do not have an insurance coverage, you may have face issues if there comes a catastrophe like a sudden earthquake or a storm or fire. It is better to have insurance on your properties rather than delaying it.
As far as penalties are concerned, it will depend upon your insurance provider and your agreement whether or not you would be charged penalties.
Sussane
Welcome to forums!
If you do not have an insurance coverage, you may have face issues if there comes a catastrophe like a sudden earthquake or a storm or fire. It is better to have insurance on your properties rather than delaying it.
As far as penalties are concerned, it will depend upon your insurance provider and your agreement whether or not you would be charged penalties.
Sussane
It was me above! Just forgot to log in! :)
I run a rental management company for condos in 3 properties, and we recently had a large water leak due to a burst pipe outside a unit's drywall - between their wall and the external wall. It put about 6 of our units out of order for 1-2 months for serious water damage - would this be covered by Rent Loss?