If you are in the commercial real estate business, one source of your income is most likely the rent you collect from your tenants. When a loss occurs, your tenants might not be able to occupy their rented space while you are having it repaired or rebuilt. If you own many properties or one single building, regardless if you have a mortgage or not, you can protect yourself by purchasing a specific type of business insurance – Rental Income.
Ask yourself in either situation – Can I afford to not have that revenue coming in? How will I cover the mortgage, or if you do not have one, how will I cover whatever other commitments I have that those rents contribute toward?
If your property is a residential risk, your tenant could be forced to move out and find a new place to live while the repairs to your property are completed. When you own a commercial building with business tenants, it is quite possible they may have to permanently or temporarily re-locate due to damage by a covered loss to your building.
Including rental income in your commercial insurance policy will protect you and usually pay up to 12 months worth of rent that you would have received from those lost tenants. You may often have the option to purchase up to as much as 24 or 36 months worth of rental income coverage.
Now considering the reverse side, the opposite can also occur to protect the tenant(s). In some instances, you as the landlord, could require your tenant(s), within their lease agreement, to cover the Rental Income on their insurance policy and name you as the loss payee for those rents, should a loss occur.
Ultimately, the coverage is designed to protect those parties with a vested interest and should not be overlooked. To receive more information or clarification on how exactly it works, or how it will protect your business scenario, contact an Erie Mutual professional insurance advisor to review and discuss your specific business needs.
Article Written by George Nikolaidis
Erie Mutual Insurance Manager – Underwriting and Loss Prevention
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If you have moved, or tenants have vacated, you will require some changes to your insurance policy and coverage. Many times owners of a vacant property may not realize the need to advise the insurer, but in reality, this is a significant change to the conditions of your existing insurance coverage and has a major impact regarding the risk involved.
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