Does Landlord Insurance Cover Loss of Rent?


February 9, 2024

Landlord insurance

So, you’ve taken the leap and invested in property. As a landlord, you know your duties, from maintaining the property to dealing with tenants. But what happens when the unexpected strikes and you have to deal with a loss of rent? Will insurance cover your rental payments if the tenant stops paying?

Let’s take a look.

Loss Of Rent: Insurance Coverage Explained

In principle, landlord insurance policies in Australia protect you from rent loss. However, not all policies are created equally, and the specifics can vary widely depending on your insurance provider and the insured address.

For example, at Duo Insurance, our policies allow landlords to receive up to 52 weeks of coverage for lost rental income as the sum insured when caused by non-tenant damages. 

What if the Tenant Stops Paying?

Typically, landlord insurance covers loss of rent where a property becomes uninhabitable due to an insured event like fire or flood, leading to loss of rental income.

Some insurers offer an additional cover called rental default for when tenants are defaulting on their rent, vacating the property without notice, or being legally evicted. 

When looking into your own coverage, know that some insurance plans might not cover loss of rent due to non-payment by tenants experiencing financial hardship or situations beyond their control, such as pandemics.  

Additionally, building cover differs from standard landlord protection or landlord contents cover, so you’ll need to speak with the insurer to understand what exclusions apply.

When choosing a landlord insurance policy, it is crucial to read the Product Disclosure Statement (PDS) thoroughly. This will provide detailed information on what your policy covers and doesn’t cover, particularly regarding loss of rent. 

Case Study: Claiming Loss of Rent with Landlord Insurance 

For a moment, let’s imagine that you’re a landlord named Alex. You own a charming oceanside apartment in sunny Sydney.

A pipe in the apartment bursts, causing severe water damage. Extensive renovations are needed, and your tenant has to move out temporarily. During this time, rent isn’t coming in, causing a substantial financial loss. This, my friends, is where landlord insurance comes into play. 

The Initial Claim: Landlord Insurance Policy

Understanding the value of his landlord insurance, Alex contacts his insurer promptly. He explains the circumstances, making clear that the incident was not due to negligence but an unpredicted crisis. 

At this stage, you need to be transparent and detailed. Remember, insurers value clarity and truthful reportage. 

Process and Document Submission  

Next, Alex submits all necessary documents — the landlord insurance policy, proof of ownership, and, more importantly, details of the rental agreement proving the tenant had to move out for repairs to happen. He also provides quotes for repair costs and an estimate of the lost rent — pivotal in evaluating his claim. 

Being organised with all these materials expedites the process dramatically, and protects his income and investment property.

Outcome and Lesson  

Due to his organised approach, his claim is granted, covering the repairs and compensating him for the lost rent during the repair period. 

This case study is a reminder of the peace of mind landlord insurance brings. With the right protection, any unfortunate incident like this can be just a small hiccup in your rental business journey, not a financial catastrophe.

How to Minimise Loss of Rent as a Landlord

You’re probably asking, ‘How can I protect my rental income as a landlord?’ Here are a few ways to keep on top of your incoming rental payments:

  • Firstly, effective tenant screening can work wonders. This practice involves running background checks and credit reports and obtaining references from a potential tenant’s previous landlord. By conducting this thoroughly, you can ascertain the tenant’s reliability and likelihood of paying rent on time or if it’s common the tenant stops paying on time. You’ll also know whether they’re likely to inflict damage on your property, too. 
  • Consistent property maintenance is another crucial step. A well-maintained rental is less likely to experience sudden major issues, which could potentially leave your property uninhabitable and cause a loss of rent. Consider creating a regular maintenance schedule to keep your property in the best possible condition.
  • Finally, think about early lease termination penalties and non-refundable deposits. The mere existence of these financial repercussions can often deter tenants from making rash decisions that could leave their property vacant.

Key Takeaways

  • Landlord insurance often includes coverage for loss of rent, but the specifics depend on your policy and insurer.
  • Claims for loss of rent follow a defined procedure, which typically involves gathering documentation and filing a claim with your insurer.
  • Minimising rent loss requires a proactive approach, including accepting the right tenant to avoid a rent default, conducting regular rental property inspections, and keeping the property in good repair.
  • Understanding your insurer’s process and policy terms can be crucial in successfully claiming a loss of rent.
  • It’s best to consult a professional or insurance provider for personalised advice about your situation and policy.

Want to see how Duo Insurance has you covered for loss of rent insurance? Get a quote now from our helpful team.

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