Will insurance for my business cover lost rental income?

There is not a simple yes or no answer when it comes to being compensated for lost rent by an insurance policy. Some landlord, apartment, or condo owner policies include a loss of rent clause, typically described in the Business Income section of the policy, but there are limitations and exclusions which could determine how effective that coverage will be.

Simply being vacant does not usually constitute a loss of rent claim. In order for the claim to be effective, there must be a covered peril involved in the claim, such as rebuilding after a fire, making extensive repairs because of damages from a former tenant, or water damage related to a broken pipe in the wall. If the property is vacant solely because you have not found a tenant, then the loss of rent is not covered.

There are two methods of insuring against lost rent. The first method is a simply dollar value, and you can receive loss of rent payments until that value is exhausted. The second method will pay you for actual loss over a period of time, and will make regular payments against the property until it is either rented or the covered number of months has been paid. In the first method, you are limited by the amount of the costs, and the second method limits the length of time. It is up to the property owner to decide which type of coverage works best, and to find an insurer offering the type of coverage needed.

In addition to loss of rent coverage, you may also want to add coverage for Business Interruption. This type of coverage has broader coverage than simple loss of income insurance and would cover the loss of income if, for example, a major storm washes out the public road leading to the property and you cannot rent the property. This type of coverage is typically used by commercial agencies with multiple properties to protect, but it can be purchased by any business owner to protect against losses. It is up to the property owner to determine what types of coverage's work best, and how much protection they should buy.