At WTJ we want to create a greater awareness over what is and isn’t covered by a policy and give you a much clearer understanding of what you are buying. Although your policy will provide you with a significant level of protection, there will be certain events that are not normally covered by standard policies. It is therefore important that you are aware of and understand these exclusions.
Protecting against loss of rent
As well as protection against physical damage to your property, it is vital that you also protect against any loss of rental income. This arises when the property is damaged to such an extent that the tenant vacates the property.
This may be covered under any loss of rent extension provided by your policy but you should be aware that not all policies have this extension. If you are unsure, contact our property team for further details.
The first, and main consideration, for cover to apply under this extension is - has the property been rendered uninhabitable by something that is insured under the policy?
It must be clarified very clearly whether the property has been rendered uninhabitable or the tenant is entitled to stop paying the rent. This will depend upon individual circumstances which will be consider on a case by case basis.
To provide some guidance, the following factors would be considered, although other factors may apply in any particular claim.
- In what circumstances is the tenant entitled to stop paying rent? This is sometimes referred to as a cessation of rent clause, but if there is no clause then the landlord is usually entitled to continue to collect the rent.
- The nature and extent of the damage. It is not the case that any damage makes a property uninhabitable.
- The circumstances of the individual tenant. What is deemed uninhabitable to one individual or firm may not be to another.
The second consideration is that there has to be an actual loss of rent.
- Is there evidence that the tenants have stopped paying the rent?
- What if the property is empty at the time of the loss? We are often told that empty properties were on the point of being let. However in order for a payment to be considered in these circumstances, clear written evidence will be required if this is the case.
It is usual to have to choose a sum insured in respect of loss of rental income. Make sure it is enough and be aware of any individual premises limits that may be present.
A loss of rent is essentially the same as experiencing business interruption. You must ask yourself whether a 12 months indemnity period is going to be enough to ensure that you are as protected as you can be should the worst happen.
If you are unsure about any aspect of your policy and what will and won’t be covered in the event of a claim, contact our property owners team. They will be able to give you all the information and reassurance you need.
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