Do you own a property which you rent out? Or maybe you rent out a portion of the home you live in? Either way, it's nice to have that rent coming in, especially if you've got a mortgage to pay off.
But if something happens to your property, and your tenants have to move out while it's being repaired, will your insurance cover the lost rent?
Some home insurance policies allow you to apply a percentage of the limit on the house to cover the fair rental value. Your insurance coverage will be completely used up if your home is damaged irreparably and needs to be rebuilt. The result is that the rent you are not receiving will not be covered.
Having rental income insurance would make this process more manageable and less painful financially. Let's say that your monthly rental income is $2,000, you should get $24,000 worth of rental income insurance so that you're completely protected even if it takes a full year for the home to be rebuilt.
Every landlord would be wise to get this type of protection. Of course, you need to go through the policy so that you understand any conditions and exclusions. For example:
Policies like this have something called "fair rental value" included in them, which means that if the rent you charge is $2,400, but the going rate for the area is $1,200, you will receive $1,200 each month for your rental income insurance payments.
The coverage you would receive would be for the amount of time to rebuild or repair your home, what professionals consider to be reasonable. If the home is repaired in 6 months time, but you don't find new tenants for a year, you will be covered for the time to rebuild only, not the additional time after that while you search for new tenants.
If you can't afford to replace your rental property or lose the money you make from it, you should consider getting rental income insurance. You don't get sufficient coverage from basic home insurance if you rent property out to tenants. Rebuilding or repairing a home is not something that can be done in a day. You need time to find contractors and to obtain building permits and you also depend on weather. Typically, repairing a home that has had major damage will take months. They can even last half a year or more. Unfortunately, tenants can't live in your rental anymore and you won't receive any money until the building is done. After the home is ready to be rented again, new tenants will need to be found, and if it's 6 months since you've received rent payments, your financial situation could be dire. If there's a mortgage owed each month, the bank only has a certain amount of patience for late payments.
But if something happens to your property, and your tenants have to move out while it's being repaired, will your insurance cover the lost rent?
Some home insurance policies allow you to apply a percentage of the limit on the house to cover the fair rental value. Your insurance coverage will be completely used up if your home is damaged irreparably and needs to be rebuilt. The result is that the rent you are not receiving will not be covered.
Having rental income insurance would make this process more manageable and less painful financially. Let's say that your monthly rental income is $2,000, you should get $24,000 worth of rental income insurance so that you're completely protected even if it takes a full year for the home to be rebuilt.
Every landlord would be wise to get this type of protection. Of course, you need to go through the policy so that you understand any conditions and exclusions. For example:
Policies like this have something called "fair rental value" included in them, which means that if the rent you charge is $2,400, but the going rate for the area is $1,200, you will receive $1,200 each month for your rental income insurance payments.
The coverage you would receive would be for the amount of time to rebuild or repair your home, what professionals consider to be reasonable. If the home is repaired in 6 months time, but you don't find new tenants for a year, you will be covered for the time to rebuild only, not the additional time after that while you search for new tenants.
If you can't afford to replace your rental property or lose the money you make from it, you should consider getting rental income insurance. You don't get sufficient coverage from basic home insurance if you rent property out to tenants. Rebuilding or repairing a home is not something that can be done in a day. You need time to find contractors and to obtain building permits and you also depend on weather. Typically, repairing a home that has had major damage will take months. They can even last half a year or more. Unfortunately, tenants can't live in your rental anymore and you won't receive any money until the building is done. After the home is ready to be rented again, new tenants will need to be found, and if it's 6 months since you've received rent payments, your financial situation could be dire. If there's a mortgage owed each month, the bank only has a certain amount of patience for late payments.
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