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Does landlord insurance help during the coronavirus?

How your landlord policy covers nonpaying tenants and liability.

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Your landlord insurance policy should offer some coverage during the coronavirus. But you might resort to other options if your tenants can’t pay their rent — standard policies don’t usually cover this reason for lost rental income.

Will landlord insurance cover expenses from the coronavirus?

Your landlord policy should cover liability claims related to the coronavirus. But most standard policies won’t cover lost rental income from nonpaying tenants. Keep these factors in mind about how your coverage comes into effect during the coronavirus:

  • Liability. You could face legal cases if tenants claim your negligence in containing the coronavirus within your property. Your liability coverage will cover lawyer costs, court fees and any penalties you might receive.
  • Lost rental income. The lost income provision on most policies only applies if your tenants must vacate because of property damage. It doesn’t apply to nonpayment or empty rentals due to evictions.
  • Guaranteed rental income insurance. You can find a few policies specifically designed for tenants defaulting on their rent. However, this coverage may only kick in when the tenant is evicted or if they abandon the rental. Because of the coronavirus situation, you might contact your insurer about whether coverage applies if you let the tenant stay.
  • Your building and contents. The coronavirus may not affect these types of coverage since you’re unlikely to prove it caused physical damage to your building.

Not every policy offers the same protection and exclusions. You might review yours before dismissing whether you have coverage, especially for lost income coverage.

Can landlords get financial support from the government?

The federal government hasn’t outlined coronavirus relief funds for landlords specifically, as of June 25, 2020. However, landlords may qualify for emergency business funds and relief under the federal stimulus package:

  • Small Business Administration (SBA) loans. This disaster financing for businesses keeps interest rates low and gives the option to defer payments for up to one year.
  • Mortgage assistance. The federal government and some local areas are offering mortgage assistance to homeowners whose incomes are affected by the coronavirus. If you qualify, you could defer payments for several months.
  • New SBA programs. The SBA Paycheck Protection Loan and Economic Injury Disaster Loan allows you to borrow money to pay operating expenses like your mortgage. The loans and grant offer loosened eligibility requirements and the possibility for loan forgiveness.

Are landlords banned from evicting tenants who can’t pay their rent?

It depends on the type of mortgage you have as a landlord. If your mortgage is backed by the government or you take part in a federal housing program, you cannot evict your tenants for 120 days, starting March 27, 2020. That means you can’t file for an eviction or even charge extra fees because of nonpayment. After the 120-day period, you have to give your tenants a 30-day notice before filing for an eviction.

In addition, a few states or local areas are enforcing bans on evicting renters, which may apply to all landlords in that area. It’s unclear how the government will help landlords with expenses, other than the business relief programs outlined in this article.

How can I help tenants who can’t pay rent during the coronavirus?

To help your tenants during hardship, you may have to look for business financial relief first and pay it forward. Otherwise, you might need tenants to leave to receive payouts from their security deposit or your insurance.

Options you might consider:

  • Make tenants aware of financial relief programs. You might send a list of local or federal resources that provide individual financial support during the coronavirus. This may help tenants continue paying their rent.
  • Look at your insurance policy. It’s worth a look at your policy’s language to see if you can cover lost income from payment defaults while tenants stay in the rental. Also, consider asking how else your insurance company can help during the COVID-19 outbreak.
  • Look for business financial relief. Some local governments or private companies are offering financial assistance or cash payments to qualifying businesses.
  • Apply for a business loan. Along with SBA loans, some private lenders are offering zero- to low-interest loans to help businesses pay expenses. You might consider lowering rent to cover just your expenses without profit until later.
  • Consider deferring rent. If you qualify for mortgage relief from your lender or the government, you could transfer the deferment to your tenants. This lets tenants pay back the rent later without losing their housing.

Is it too late to buy landlord insurance?

No, you should be able to take out landlord insurance today and still get liability coverage for the coronavirus. However, you should be upfront with your insurance company about the possibility of liability claims or nonpaying tenants. Then, your company can give an accurate assessment of your risks and answer questions about coronavirus coverage.

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How can I free up my business’s cash flow?

You have several options to get business finances under control. You might start with:

  • Dropping nonessential subscriptions or purchases until the economy recovers
  • Negotiating with other businesses who supply you with goods or services
  • Getting a new business credit card with a 0% intro APR
  • Seeing if you can make claims with other business insurance policies

Bottom line

Your landlord policy won’t help with lost income if your tenants default on rent unless you bought a specific guaranteed rental income policy. However, you might find government and local resources to support your business despite your lost rent. What landlord insurance can help with are legal cases if tenants file claims against you during the coronavirus.

Common questions about landlord insurance and the coronavirus

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