Do you have a rental suite that you are renting? It could also be that you're renting part of your own home to tenants. The rent payments can make a big difference to a landlord, and if you've got a mortgage, it may be very important.
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?
You have the option to apply a percentage of the house limit to cover fair rental value with certain home insurance policies. If the damage is severe and the home needs to be rebuilt, the entire coverage available will be used in the rebuilding process. That means there would be no insurance left to cover the lost rent.
If you had purchased rental income insurance, you would be grateful that you had made that decision. For example, if you're rental income is $20,000 per year, you can choose to purchase $20,000 worth of rental income insurance so that if it's a year to repair, you are covered completely.
Coverage like this is so important, all rental property owners should have it. As with all types of insurance, though, you need to be aware of the exclusions and conditions. An example of this would be:
The policy usually stipulates that the insurance will pay the "fair rental value", so if you've been charging $2,000 a month, but the going rate in your area is only $1,000 a month, you'll only receive $1,000 a month.
The coverage you would receive would be for the amount of time to rebuild or repair your home, what professionals consider to be reasonable. When a rebuild or repair is completed in 6 months, but you do not rent the unit right away, you are only covered for the period of the rebuild, not the extra time after.
When your rental income is too important to your financial situation to temporarily lose, rental income insurance is something you should consider very seriously. When you are renting out your home, a regular home insurance policy will not provide enough protection. Keep in mind that it will take a while for the repairs to be made. 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. Sometimes, it is even 6 months or longer to complete. Unfortunately, tenants can't live in your rental anymore and you won't receive any money until the building is done. You'll have to find new tenants and even though the building might look perfect, the six or more months without rental income might have been devastating for you. If you have to pay mortgage, the bank is not interested in the fact that you have lost your income.
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?
You have the option to apply a percentage of the house limit to cover fair rental value with certain home insurance policies. If the damage is severe and the home needs to be rebuilt, the entire coverage available will be used in the rebuilding process. That means there would be no insurance left to cover the lost rent.
If you had purchased rental income insurance, you would be grateful that you had made that decision. For example, if you're rental income is $20,000 per year, you can choose to purchase $20,000 worth of rental income insurance so that if it's a year to repair, you are covered completely.
Coverage like this is so important, all rental property owners should have it. As with all types of insurance, though, you need to be aware of the exclusions and conditions. An example of this would be:
The policy usually stipulates that the insurance will pay the "fair rental value", so if you've been charging $2,000 a month, but the going rate in your area is only $1,000 a month, you'll only receive $1,000 a month.
The coverage you would receive would be for the amount of time to rebuild or repair your home, what professionals consider to be reasonable. When a rebuild or repair is completed in 6 months, but you do not rent the unit right away, you are only covered for the period of the rebuild, not the extra time after.
When your rental income is too important to your financial situation to temporarily lose, rental income insurance is something you should consider very seriously. When you are renting out your home, a regular home insurance policy will not provide enough protection. Keep in mind that it will take a while for the repairs to be made. 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. Sometimes, it is even 6 months or longer to complete. Unfortunately, tenants can't live in your rental anymore and you won't receive any money until the building is done. You'll have to find new tenants and even though the building might look perfect, the six or more months without rental income might have been devastating for you. If you have to pay mortgage, the bank is not interested in the fact that you have lost your income.
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For further details, please visit this blog, or if you're a first time home buyer visit www.squareoneinsurance.ca.
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