Rent Loss Insurance policies cover your home for any loss in its rental value…actually it usually comes with the entire package of hazard insurance on your home/other rental property. If your residential property faces any damage or loss due to the external hazards and natural calamities, it may become unsuitable for living any more, so naturally you may not be able to use it for rent purpose . You can make up for your loss if you have a good Rent Loss Insurance policy.
Rent loss insurance: a mandatory thing?
Normally, at the time of purchasing your investment property, you are required to take up this insurance policy. Most of the mortgage firms, as per their financial service related terms and conditions, would ask you to purchase that policy. In fact, it is mandatory and a must-to-do thing for the borrowers to take up this rent loss policy, according to the lending guidelines into effect. And, if the number of investment or rental property is more than one, then for each property separately insurance policy is mandatory.
The amount you pay as premium for the policy covers (of course for a limited time duration) for physical damages to the property and for any financial loss caused due to loosing a rent on account of residential damage. Coverage is for gross rental income for a time duration of 6 months minimum.
Factors that affect rent loss coverage
Normally the entire time duration for receiving the output of this coverage is limited. But, yes, when your residence is damaged, you would receive rent loss compensations from your policy coverage until you repair the damaged part of your home or rental property and get to fetch a good tenant. Generally, the amount of monthly premium you pay for your insurance is finalised by: sorting out the variables at the rental unit in different (more than one) categories.
Roughly, after deduction of the following items you spend on in a month, the net available, in-hand amount of the coverage of this policy is greatly dependant on monthly rental income.
• Utilities expenses
• Maintenance costs
• Tax to be paid off
• Mortgage installments
• Vacancy available for rental purpose in your locality
• Insurance premiums you pay
Undoubtedly, it is good to take up the rent loss coverage if the money of monthly rent works as your principal earning source for making payments of the mortgage on your investment property-for you, it acts just like a shield of protection from any possible damage of your favourite, loving, sweet home…and compensates you for any rent loss.