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Loss of Rents Guide

Rent is the main source of income for landlords or people with short term rentals like an AirBnb. An insurance policy that covers loss of rent is essential.

There are a few scenarios where loss of rent cover can arise.  The following Loss of Rent cover applies to the specialist initio landlord insurance product.

1. Loss of Rent – Property Damage

The primary rents cover under the initio landlord policy is for loss of rent resulting from physical damage. If your property is damaged (e.g. by a house fire) and unable to be lived in, initio pays for the rents that would otherwise have been received while the property is being repaired.

12 Months Loss of Rent, up to the Loss of Rent sum insured selected.

Initio provides $20,000 of annual loss of rent cover for free. You can choose to increase this cover to $40,000 or $80,000.

Initio will pay the landlord up to any unlimited weekly rent amount they usually receive.  Rents payout will stop once the loss of rent sum insured has been reached (e.g. $20k), or after 12 months of rent payments (which ever comes first). Loss of rents payments will also stop once the property is able to be lived in or tenanted again.

No excess applies to this cover as an excess will apply on the damage to the home that triggered the loss of rent.

2. Loss of Rent – Tenant Vacating or Eviction

As a landlord you are exposed to tenant risk. This can cause loss of rent without physical damage to your property.

The initio landlord policy includes a Landlord Protection extension. This covers loss of rent following a tenant eviction, or where a tenant vacates your property without giving notice (and stops paying the rent).

Loss of rent following eviction of a tenant for non-payment of rent.

– Up to 6 week’s rent cover, minus any rent you received in advance.

Loss of rent following the tenant vacating the home without giving the required notice.

– Up to 6 week’s rent cover, minus any rent received in advance.

No excess applies to claims for this loss of rent.

A tenant eviction for non-payment of rent will typically go through the Tenancy Tribunal.  You can apply to the Tenancy Tribunal for termination of a tenancy if rents are 21 days in arrears or more. For more information on tenancy terminations please visit here.

Cover for the loss of rent following a tenant eviction does not cover the unpaid rent leading up to the eviction. Rent received in advance and the landlord’s bond is designed to be applied to these arrears. Initio will then cover the lost rents after the eviction and while a new tenant is found for up to six weeks.

Landlord Obligations

You must meet the Landlord’s Obligations specified in the landlord insurance policy to have cover for loss of rent following a tenant eviction or vacation. The landlord obligations apply to all claims under initio’s ‘Landlord Protection’ cover.

However, you do not need to meet these obligation’s if the loss of rent has come about from non tenancy risks such as a flood, burst pipe or fire.

Loss of Rent – Short Term Accommodation (AirBnb, BookaBach)

Initio also covers loss of rent following physical damage to short term rentals such as an Airbnb holiday home. Because there is no set weekly rent amount a calculation is made on the likely lost rent amount.

12 Months Loss of Rent, up to the Loss of Rent sum insured selected.

Initio provides $20,000 of cover for free, with options to increase to $40,000 or $80,000.

The Loss of Rent calculation takes account of future actual bookings that need to be cancelled and also expected bookings. If required we may also account for the same period in the previous year, and use short-stay occupancy rates in that particular region. Unlike initio, most insurers will only look to cover the actual cancelled bookings, and not expected bookings.

Tenant eviction or vacation cover does not apply to short term accommodation. This is because short stay Airbnb or BookaBach guests do not have a formal tenancy agreement.