Rental Income Insurance

10 Replies

I don't have any rentals as of yet, but it's an area that I'm hoping to get into. I was reading an article (from the REI Expo magazine, if you're curious) and it mentioned "coverage against rental income interruption" and "tenant-paid rental protection plans. They didn't use the word insurance, but it sounded like insurance for landlords to protect against empty units.

I've never heard of this before and was wondering if anyone has experience with it. If so, what do you think of it? Are the terms and cost reasonable? Does it pay for the time between tenants or only if say a tenant signs a one-year lease and then bails after month four?

When I got insurance for a rental property, the policy had something similar to "rental income interruption". My agent told me it covers when the property is unable to be rented because of damage. It doesn't cover when the tenant moves out, and the house is still habitable.

@Mark S. to be more precise, it's a rider that covers the lost rent due to an insurance covered claim. I had lightening strike my property and set it on fire. Insurance got a copy of my lease and paid rent until work was done. I was not able to rent for a few weeks after it was complete and they would not cover that. It's a must have if you have a mortgage on the property. Most lenders require it.

No Mark I know what you are talking about. It's different than anything that is included in the property's insurance. You pay a (small) annual fee and it actually does cover rental income interruption and eviction costs and all that. However, the main company who has offered that for the last couple years and the only one I know who has had it, just lost their backer and are no longer offering it. I had it on one of my properties and once my policy expires on that one, it's over. Not sure their plans to get back in the game with it, but for now I think it's not going to be available any longer. Unless you know of another company who offers it, let me know because I'd be interested in it.

@Mark S.

I believe @Ali Boone was talking about AON insurance company that recently discontinued their guaranteed rental income policy.

Here is another company that is offering a similar product.

www.thegrp.info

I have not used either company and it seems kind of pricey to me. I think good tenant screening could greatly reduce your risk of needing such a policy.

Dusty

@Mark S. @Evan R.

Welcome to BiggerPockets!

Mark, the ad you're referring to is an insurance policy covering rental interruption related the to property's inability to be leased (from fire, vandalism, etc.). It is not tied to the tenant, it's tied to the property.

My company used a true rental default coverage from AON up until recently when they stopped offering it. That covered interruptions related to the tenants situation. It was a good product but a little pricey.

The biggest key to your success is having good property management, leading to a quality screened and qualified tenant. I've been doing this for over 10 years and if I had to pick just one thing to rely on it would be the PM.

Continued success!

Thank you everyone for your responses. Part of what I was trying to determine was in fact whether this was a unique form of insurance protecting against tenant failure to pay due to financial struggles, the turnover period between tenants, if you're having trouble getting a tenant, etc. or if it was simply an awkwardly worded traditional property insurance policy.

The responses seem to help make that distinction. Apparently there is a difference. Thank you in particular to @Ali Boone and @Dusty Corning . In answer to your question Ali, no, I don't know of another company. The article was speaking in generalities and not referencing any particular company or provider. But check out Dusty's link. I can't vouch for it myself, but it appears to fit the description.

Originally posted by @Dusty Corning :

Here is another company that is offering a similar product

thegrp.com

I have not used either company and it seems kind of pricey to me. I think good tenant screening could greatly reduce your risk of needing such a policy.

Dusty -- the company you are referring to is no longer in business. They were an affiliate of AON and was simply offering their product for a referral fee.

@Mark S.

@Dusty Corning

Yep, I was just about to say what @Marco Santarelli just did...after looking at that company they were only an affiliate of Aon. So I think we are all dead in the water for now. I haven't heard of anyone else offering that insurance yet.

The best thing to do is do hardcore tenant screening to help avoid any problems.

The trigger on this type of policy is almost always a broken lease. It insures a landlord's financial interest in a tenant's contractual obligation. So it would only cover vacancy if that vacancy was caused by an eviction or a tenant breaking a lease, not if it was caused by a landlord having trouble finding a tenant.

That distinction might be moot, since these policies do seem to be gone for now. But just in case they come back...

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