Does Landlord Insurance Cover Loss of Rent?
If you are a landlord, relying on a standard homeowners’ insurance policy is not enough. You will not be protected from loss of rent caused by tenant negligence, natural disasters, or vandalism. That’s where
landlord insurance
comes in.
However, before choosing a policy, it is important to understand exactly what it covers – and what it doesn’t. Before deciding, ask yourself these key questions: does this landlord insurance cover loss of rent? Am I covered if tenants fail to pay or simply disappear? How does this landlord insurance help my ROI?
What Does Landlord Insurance Typically Cover?
Each landlord insurance policy will be slightly different. Here are some common areas found in a “standard” policy:
Property Damage
This typically includes both property damage caused by natural disasters, such as fires and earthquakes, and triggered by acts of humanity, primarily vandalism. It may also cover the cost of damage to large necessary appliances like refrigerators. However, damage to a tenant’s personal items and to nonessential pieces, such as TVs or other small electronics, is usually not covered.
Liability
Your landlord insurance should protect you if a tenant or guest is injured while on the property. This is extremely important, as it helps you to avoid expensive, reputation-damaging lawsuits. Some policies include protection against liability for damages of a tenant’s property, for electronics destroyed by a power surge or clothing ruined by a burst pipe.
Loss of Rent from Property Damage
Ideal landlord insurance should protect against loss of rental income due to the property being temporarily uninhabitable as a result of a covered damage to the premises. For example, flood or fire damage can cause a property to be closed to tenants for several weeks or months.
Some insurance companies include this as part of the standard landlord insurance package and others offer it separately under the name “
rent loss insurance
”. Make sure to clarify what a company’s offer includes before choosing a policy.
When Loss of Rent Isn’t Covered
The question “does landlord insurance cover loss of rent” can be tricky to answer. As discussed above, landlord insurance may cover loss of rent when events like floods or fires cause a property to be uninhabitable, but that still leaves a wide range of situations which could result in significant loss of rental income.
For example, what happens when a tenant fails or refuses to pay their rent on time month after month? Alternatively, your renter in place could lose their job and no longer afford rent payments. In both of those cases, it is unlikely that a standard landlord insurance policy would help you. Luckily, there is a solution to enhance your rent loss coverage:
rent default insurance
.
Landlord Insurance Add-On: Rent Default Insurance
Since landlord insurance and rent loss insurance typically do not cover loss or rent caused by tenant non-payments, you may want to consider rent default insurance (or
rent guarantee insurance
)
to cover all your bases.
This unique policy specifically protects landlords in situations where the tenant chooses not to pay their rent, despite the property remaining undamaged and fully inhabitable.
Rent default insurance must be purchased separately from standard landlord insurance. Landlords are typically required to take out one policy per rental property, which is often re-negotiated on a tenant-by-tenant basis. You can easily find these types of policies from specialized rent default insurance providers like
Steady
.
Rent default insurance works via the payment of a premium, which varies in cost depending on the property, in order to ensure that the landlord continues to receive monthly rent if a tenant defaults. Insurance companies typically cover up to six months of lost rent following the tenant’s nonpayment, giving landlords time to seek out newer, more reliable tenants and re-establish their rental income.
Choose Steady for Rent Default Insurance
Tenants may not always be reliable – but Steady is!
Steady
offers rent default insurance policies covering up to 6 months of rent loss. You can easily pair a Steady policy with your existing landlord insurance to keep yourself protected against all possible risks.