Landlord insurance loss of rent pays the rent that stops arriving because the property cannot be lived in after an insured event. It is included on almost every landlord policy and almost nobody checks the two numbers that decide whether it will be enough: the amount, usually expressed as a percentage of the buildings sum insured, and the period, usually expressed in months.
How the amount is expressed
Most policies state loss of rent as a percentage of the buildings sum insured, commonly a fifth or a quarter, rather than as a cash figure. On a property with a low rebuild cost and a high rent, that percentage can be less than a year of rent. Working out what the percentage actually comes to in pounds, once, is the whole check.
The period, and how long a rebuild really takes
Twelve months is the usual default. A serious fire involving planning, insurers' loss adjusters, a contractor and a building control sign off routinely takes longer. Where the property is listed, in a conservation area or part of a terrace, longer again. A twenty four month period costs little more and removes the tail risk.
What it does and does not respond to
It responds where the property is uninhabitable following a peril the policy covers: fire, flood, escape of water, storm. It does not respond to a tenant who stops paying, which is rent guarantee, nor to a void between tenancies, which is nobody's claim. It usually also pays alternative accommodation where the tenancy obliges you to rehouse the tenant.
The mortgage is the reason it matters
A landlord with no mortgage loses income. A landlord with a mortgage loses income while an obligation continues, which is a different problem. Sizing this section against the mortgage payment as well as the rent is the practical test, because that is the number that has to be found every month whether or not the property is standing.
Questions people ask about landlord insurance loss of rent
How is loss of rent calculated?
Usually as a percentage of the buildings sum insured, commonly a fifth or a quarter, over a stated period. Work out what that percentage is in pounds for your property.
How long does it pay for?
Twelve months by default on most policies. A serious rebuild often takes longer, and extending to twenty four months usually costs little.
Does it cover a tenant who stops paying?
No. That is rent guarantee, a separate and heavily conditional product.
Does it cover rehousing the tenant?
Most policies include alternative accommodation where the tenancy obliges you to rehouse, often within the same limit.