Doc Summary
Yes. Commercial property insurance can include cover for rental income lost following insured physical damage to the property.
This is commonly structured as Loss of Rent or within a Business Interruption section.
When can Loss of Rent cover apply? #
A typical example is where:
- The building is damaged by an insured event.
- The tenant cannot occupy all or part of the premises.
- The landlord loses rental income while repairs are completed.
The actual trigger depends on the policy wording.
What period should be insured? #
Consider how long it could realistically take to:
- Assess the damage.
- Obtain approvals.
- Demolish damaged structures.
- Design the replacement.
- Rebuild.
- Refit the premises.
- Restore tenant occupancy.
Large commercial buildings can take a substantial period to reinstate.
How much rent should be insured? #
Consider:
- Current annual rent.
- Outgoings recoverable from tenants.
- Expected rental increases.
- Potential changes during the rebuilding period.
The correct basis depends on the policy.
What if the tenant stops paying rent without property damage? #
Standard property Loss of Rent cover generally requires an insured physical damage event.
It should not be confused with residential landlord rent default insurance.
What if the property is only partly damaged? #
A partial loss can still reduce rental income.
The policy may respond where insured damage prevents or restricts use of part of the premises, subject to the wording.
