Landlord insurance covers the landlord for losses arising from the action or non-action of tenant. It is usually bought for residential property and typically covers the following occurrences:
- Non-payment of rent by tenant
- Damage to the property which is above the amount of security deposit;
- Loss of rental income during the period of repair due to (2)
- Legal fees and other charges for evicting the tenants
- Commission payment to property agent for finding a new tenant
It is observed that, during economy crisis, the likelihood of defaulting on rental payment is high and therefore it is always good to have this landlord insurance. With retrenchment and rehiring more common in this digital economy, we can expect more people to lose their jobs and seek re-employment in the short term. This increase the risk of tenant delaying payment or absconding without the payment of rent.
Example of Usefulness of Landlord Insurance
A tenant defaulted on monthly rental payments and the tenant refused to vacate the house. The landlord incurred further legal cost seeking an eviction order. With landlord insurance policy, the landlord was covered for loss of rent, the legal cost for evicting the tenant and the commission paid to property agent to find a new tenant and the cost was fully paid by the insurance company. The landlord did not have to face the losses himself and this allowed him to continue to collect his rent without worrying about the loss.
Death of Tenant
A tenant died during the period of tenancy and the apartment was left without an occupant for many months. The landlord required the monthly rent to service the mortgage or loan. Without the rental income, he could not service his loan and faced financial difficulty. The lender repossessed the property. This would not have happened if the Landlord had been covered under the Landlord insurance because the lost of rental income would have been covered and the loan repayment would not have been affected.
Such rent guaranteed insurance is necessary if the landlord is not financially strong to withstand temporary lost of rental income.
Other Coverage for Insurance on Rented Properties
Landlord insurance normally comes with other optional coverage like lost and damage to the contents and belonging of the landlord. It should also cover fire insurance and theft insurance.
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