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Does Landlord Insurance Cover Loss of Rental Income?

Find out when you’re covered if a tenant stops paying or your unit becomes unliveable

If you rely on rental income to pay your mortgage, cover expenses, or supplement your earnings, losing that income—even for a few weeks—can create real financial stress. That’s why many landlords want to know if their insurance protects them when rent isn’t coming in.

This becomes important when a kitchen fire makes your unit uninhabitable or a pipe burst forces lengthy repairs. You might think about this the next time you renew your policy or a major storm hits your area.

When Loss of Income Is Covered

Standard landlord insurance often includes loss of rental income protection—but only under specific conditions. Coverage generally applies when:

  • Your rental property is damaged by an insured peril (like fire, wind, or water)

  • The damage is significant enough to make the unit uninhabitable

  • You lose rental income during the necessary repair period

This is sometimes called “rental income replacement” or “fair rental value” coverage. It only activates when a claim has been approved for physical damage to the building.

For example:

  • A grease fire in the tenant’s kitchen causes smoke and structural damage.

  • Your insurer approves the damage claim and confirms the unit is unsafe to occupy.

  • You receive monthly rental payments from your insurance while repairs are completed.

What Is Not Covered

Loss of income coverage does not apply in every scenario. It typically does not pay out if:

  • A tenant simply refuses to pay rent

  • The unit is vacant for personal or business reasons

  • The damage is caused by an excluded peril (like flooding without flood insurance)

  • You’re renovating or upgrading the property voluntarily

Note: If you want protection for non-payment by tenants (such as missed rent due to job loss or lease violations), that requires a separate policy or specialized rental income insurance.

How to Know If You Have It

Loss of income protection is often included in landlord policies, but not always by default. To find out:

  • Check your Declarations Page or ask your insurer about "loss of use" or "rental income" coverage

  • Confirm the limit and maximum time period covered—some policies cap this at 12 months

  • Ask whether coverage applies to partial losses (e.g., if only one of two units is affected)

Scenario Covered by Loss of Income Insurance?
Unit is damaged by fire and becomes unliveable Yes
Tenant stops paying but remains in the unit No
You choose to renovate the rental space No
Sewer backup forces temporary evacuation Yes, if backed by valid coverage
 

Tip: Keep detailed records of rent amounts, leases, and vacancy periods. Insurers often ask for documentation to validate income loss during a claim.

Having loss of rental income coverage can mean the difference between financial stress and financial stability after a disaster. It’s a smart and often overlooked component of landlord protection that helps ensure your investment continues to work for you—even when your tenants temporarily cannot.