Running a rental business is difficult, but rewarding. COVID-19 is certainly one of those difficulties, so much so that issues outside the pandemic might be ignored or shrugged off as insignificant in comparison. These factors aside from a pandemic could disrupt your business in the future and that there are steps you should take preemptively to protect your interests. There’s no reason to put yourself in a position in which you’re left holding the short end of the stick.
Business Interruption and Rent Loss Insurance
As a landlord, you have two different types of insurance policies available to you: business interruption insurance and rent loss insurance.
Business interruption insurance compensates you for income lost when you must suspend normal operations because of physical damage to your property or a civil order requiring your business to close. This differs from a third type of insurance policy that you’re likely already very familiar with—property insurance—which only covers physical damage to your property. It’s worth noting that business interruption insurance is typically available as an add-on to your current policy and can provide money to pay salaries, benefits, and extra expenses incurred.
Rent loss insurance will cover your tenants’ rental payments should they be partially or fully abated. Rent abatement can be triggered by damage or interruption which results in your renter not being able to use the space they agreed to rent from you. In such a situation your rental loss insurance policy would pay you the difference in uncollected rent until the damage or interruption is completely solved.
You may choose not to add business interruption or rent loss insurance to your policy because you think the risk of such interruptions does not justify the premium payments. If so, you’ll want to explore other safeguards that do not rely on a third-party insurance provider.
The simplest safeguard comes in the form of a rainy-day fund. Instead of paying a third-party insurance company to protect you against financial loss, you can start a savings account or money market account to which your business contributes monthly. Your savings will accrue interest in the account and will be available should you ever need to withdraw due to an emergency. It’s worth pointing out that a rainy-day fund can only cover you to the degree that you have available funds. Should damages or costs exceed your savings, you’ll be out of luck. Insurance policies are structured in such a way that they’ll generally pay you more than you pay into them.
PointCentral: Automation Solutions for Rental and Vacation Properties
While we’re not an insurance provider of any sort, we can certainly help you with updating your property. At PointCentral we build advanced smart home automation systems to enhance the safety, comfort, and well-being of property owners. Our systems and services are designed to make your properties easier to manage, more rentable, and more cost-efficient. It’s worth keeping in mind that our smart devices often improve safety and monitoring, something that property insurers like to see!
To learn about how your properties can benefit from the latest smart home technology, contact PointCentral for a free demo today.