Landlords, unlike other companies, make their living by renting out houses and apartments to people who need housing. Being able to successfully do this relies on a number of factors, from having tenants who pay enough, to keeping the building in good shape, to paying the mortgage, to keeping some extra for the landlord to live off of. What happens when a building doesn’t have tenants? The landlord runs the risk of losing money due to a lack of business, much like every other company. Thankfully, there’s a solution to this: loss of use insurance.
Properties Can Get Damaged
While you should have a standard rental building insurance policy on your building, which would cover everything from fire or wind damage to the exterior structure, as well as the common spaces, like the stairs, lobby, and elevators within it, these policies won’t help pay the mortgage or keep the other bills paid while your tenants aren’t allowed to live in the building.
Look at it this way: imagine that your building catches fire. Although it’s not a total loss, you can’t have any tenants living in it while it’s being repaired. Your standard building insurance will pay for the repairs, and your tenants hopefully have rental insurance to pay for the loss of their belongings, moving, and housing costs while the building is out of commission. However, this leaves you without income.
Where can you get an income to keep up with the mortgage and other costs? A loss of use insurance policy, of course.
Loss of Use Insurance
In general, loss of use insurance kicks in when you can’t have tenants living in your rental property. These policies tend to cover between 10% and 20% of what their rental payments would be, along with other dwelling expenses, allowing you to hold onto your property while you wait for the repairs to be done. This way, your tenants can focus on rebuilding their lives, as you wait for your building to be habitable again. No one really loses out, and you particularly get to keep some of the income that you lost due to the damage.
What Doesn’t Loss of Use Insurance Cover?
There are numerous circumstances that loss of use insurance won’t cover, such as tenants that move out unexpectedly without notice or are evicted due to loss of rent. In both of these situations, it’s on you to find new tenants as quickly as possible.
Loss of use insurance is designed to help when your building can’t be safely lived in, not when your tenants disappear quickly without warning. The policy won’t help in this case, so you’ll need to place those ads and find new tenants to move in before you suffer from a loss of income.
Have Questions? Contact Charlotte Insurance
Want to learn more about loss of use insurance for landlords? Contact Charlotte Insurance. Our agents can explore and explain all available options and put together the insurance coverage plan your business needs.