Landlords: Do You Know What Rent Guarantee Insurance is?
As a landlord, you make money by collecting rent from tenants. But what happens if your tenants do not pay their rent? They will probably get evicted, but you still need their rent payment to cover operating costs. Landlords need to make sure they have some form of coverage in place to protect themselves from nonpayment. The best way to do this is with commercial landlord rent guarantee insurance.
In this article, we will talk about how you can handle nonpayment with rent guarantee insurance. We will cover what rent guarantee insurance is, how it works, and how landlords can get this coverage. Let’s get started!
What is Rent Guarantee Insurance?
Rent guarantee insurance is a form of insurance coverage that landlords and property managers can purchase for protection against losses in the case of a tenant who stops paying rent.
According to Investopedia, “this insurance pays the monthly rent for a set period of time if the covered tenant stops making payments.”
It is important to note that rent guarantee coverage does not cover the cost of evicting a tenant.
How Does Rent Guarantee Insurance Work?
There are many reasons why a tenant may stop paying rent. Here are some examples:
- A decrease in cash flow
- Military Deployment
- Relationship problems
- Medical issues
So, with rent guarantee insurance, the landlord has protection against tenants who stop paying rent. There is no coverage for the tenant.
In the case that a tenant stops paying rent and a landlord carries rent guarantee insurance, the landlord will have coverage. The insurance provider the landlord purchased the insurance from will cover the cost of rent for the period of time stated in the contract.
The insurance carrier can bring legal proceedings against the tenant, and the tenant will be liable for legal fees.
It is important to note these policies generally take a month of nonpayment before they will kick in.
How do Landlords Get This Coverage?
Getting rent guarantee insurance can be difficult for landlords who have tenants with less-than-perfect renting records. Landlords first fill out an application for the coverage and submit it to insurance providers who carry out extensive research. Insurance carriers who provide this coverage do extensive research before providing coverage because of how expensive this coverage can turn out to be.
For example, if you have a tenant with a history of falling behind on payments or stopping payment altogether, you probably will not receive coverage for this tenant.
Whether a landlord gets this coverage is not as much about the landlord’s history, but instead about their tenants.
How to Keep Track of Your Policies
If you have rent guarantee insurance for multiple tenants, it will become difficult to keep track of when one policy expires and when another one goes into effect.
To solve this problem and save yourself time and confusion, you need to implement a certificate of insurance (COI) tracking solution into your operations.
If you are unsure of how to track COIs check out our website for more info!