A Beginner’s Guide to Landlord Rent Loss Insurance

Posted by Rebecca Moseley on Jan 6, 2021 9:00:00 AM

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If current events have taught us anything, it’s to expect the unexpected. As a landlord, this is especially true.

Rent loss (or loss of rent) insurance is a fantastic way to protect yourself from the unexpected. This type of insurance will cover lost rental income when a covered event occurs that makes your rental property uninhabitable. With some landlord insurance policies, this coverage is standard — with other policies, it might not be.  See our full guide to landlord insurance and liability coverage for more information and always check with your insurance provider about your specific coverage.


Landlord Insurance Basics

As a landlord, you’re probably already familiar with landlord insurance. If you’re new to the industry, landlord insurance is coverage that is designed to protect you and your investment. Keep in mind, it does not protect your tenant — they will still need their own renter’s insurance. With landlord insurance, your property will be covered and, in some cases, your rental income can also be reimbursed. Learn more about Renter's Insurance for Tenant Coverage

 

What is Rent Loss Insurance?

Rent loss insurance, sometimes called fair rental value coverage, covers a loss of rental income if your property becomes uninhabitable to a current tenant due to covered damages beyond your control. This could include a tree damaging the roof or a pipe bursting and requiring extensive repairs. However, if no tenant is in place when the covered event occurs, rental loss insurance will not apply.

Further, loss of rental income due to COVID-19 is not covered by rental loss insurance. Additional events that would not be covered are losses that require other specific coverage such as hurricanes and floods. For example, if your tenant is displaced because of a flood, rental loss insurance can only be used if flood coverage is part of your existing policy. There are variances in different policies, so always work with your insurance agent to determine which events will be covered, and which will not be.

 

Rent Loss Insurance vs. Landlord Insurance

Landlord insurance is a very broad term that encompasses a lot of coverages, while rent loss insurance is a specific category or add-on in some landlord insurance policies. Typical landlord insurance covers the cost of a damaged property, but not necessarily the lost income from it not being occupied. Standard landlord insurance can also protect the landlord from liability in the event that a tenant is injured on the property.

 

Standard Coverage Amounts

As with all insurance, standard coverage amounts may apply. Some carriers allow for a specific coverage amount such as $12,000 per policy, while other carriers will have a term amount such as 12 months of sustained loss. Check with your insurance provider to get the specifics of your plan.

 

How Much Does Rent Loss Insurance Cost?

The cost to add rental loss coverage to your insurance policy will depend on the carrier you select. However, according to the Insurance Information Institute, landlord policies typically cost 25% more than a standard homeowners policy, but have increased protections. The actual coverage cost will vary, dependent on a number of factors.

SteadyMarketplace.com says, “In 2018, the majority of landlords reported paying between $800 and $2,000 per property in annual premiums for landlord insurance. The cost of rent loss insurance typically represented anywhere between one third and one half of this annual amount. Rent loss insurance was often found to cost less when bundled with other types of landlord insurance.”

For more details, talk with a local insurance agent to determine the coverage you will need and what the cost will be for this coverage.

 

Loss of Rent Insurance Options

There are many insurance carriers to choose from for your landlord insurance and each will have slightly different coverage options and benefits. Most will offer some form of rental income loss coverage, whether standard or as an add-on to your policy.

Here’s a look at three popular carriers and their landlord rental policies:

 

State Farm

State Farm Landlord Insurance has a wide range of coverage and includes Loss of Rent Coverage with their standard policy. According to the State Farm Rental Home Insurance webpage, “the State Farm Rental Dwelling Policy covers accidental, direct physical loss to your rental dwelling and your personal property located there, based upon the coverage provided by your policy.”

State Farm Rental Home Insurance coverage includes:

  • Dwelling Coverage
  • Personal Property Coverage
  • Loss of Rent Coverage
  • Liability Coverage

 

SafeCo

Safeco Landlord Insurance is a great option for landlords who want to customize and bundle their coverage. According to Safeco’s Landlord Coverage page, “We offer extensive loss of use and liability coverage for your residential rental property including items such as microwaves, refrigerators, and washer and dryers being used by your tenants.”

Safeco Landlord Insurance coverage includes:

  • Landlord Protection Insurance Coverage Options
  • Open Perils or Named Perils Coverage
  • Extended Dwelling Coverage
  • Premises Liability Coverage
  • Protection from Personal Injury Lawsuits
  • Limited Liability Coverage Options
  • Additional Valuable Coverage Options

 

Liberty Mutual

The landlord insurance coverage offered by Liberty Mutual is a great option for landlords with multiple properties who want to customize or bundle their insurance coverage. According to Liberty Mutual, “Liberty Mutual policies are a good fit for most landlords. We cover landlords who own up to 16 units... and we can add your LLC as a named insured.”

Liberty Mutual Landlord Insurance coverage includes:

  • Physical Structures
  • Personal Property
  • Fair Rental Value Coverage
  • Inflation Protection
  • Premises Liability Coverage

 

Do You Need Rent Loss Insurance?

So, do you really need rental loss insurance coverage if it’s not already a part of your policy? If your lender doesn't require it, then the answer really depends on you and your comfort level with risk. The insurance you carry on your rental property could make all the difference in your success as a landlord when the unexpected occurs.

Insurance protects you and your investment, and mitigates risk to you as a landlord. Rent loss insurance coverage can keep you afloat should you find yourself in a situation where your rental property becomes uninhabitable. This, in turn, can protect you from having to default on your loan for your rental property. Visio Lending is proud to be your trusted rental loan partner, offering you the tools and financing to be successful.

Contact Us For Your Rental Loan Needs Today

Topics: Insurance