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Does landlord insurance help during the coronavirus?

How your landlord policy treats nonpaying tenants and liability from the pandemic

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 from 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 you were negligent about coronavirus safety. Your liability coverage will cover lawyer costs, court fees and any penalties you might receive from a court case.
  • Lost rental income. Your landlord policy only pays for lost rental income if your tenants move to temporary housing so that you can repair property damage. It doesn’t apply to nonpayment or empty rentals from evictions.
  • Guaranteed rental income insurance. You can find a few policies designed to help when tenants default on their rent. However, this policy may kick in only when the tenant is evicted or abandons the rental.
  • 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. Review your policy before dismissing whether you have coverage, especially for lost income coverage.

Is it too late to buy landlord insurance?

No, you should be able to take out landlord insurance today and get liability coverage for the future coronavirus cases. 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 any questions about your coverage.

What happens if tenants default on rent?

If tenants can’t make their rental payments, you typically can serve tenants a notice to either pay or move out. Most states have specific guidelines that landlords have to follow when serving this notice, such as providing it in writing and giving a few days to move out.

If the renter doesn’t follow the instructions on your notice, you can file a lawsuit for eviction. You have the burden of proving the renter’s violation of your rental contract. You’ll need proof that your tenants either didn’t pay or they violated another part of the contract, like keeping a dog on the property without paying fees.

Once tenants leave the property, many states let you keep some or all of the security deposit for unpaid rent or rental damage.

Are landlords banned from evicting tenants during the coronavirus?

It depends on the type of mortgage you have as a landlord. You’re banned from evicting tenants until December 31, 2020, if you have a Federal Housing Administration (FHA), Freddie Mac or Fannie Mae loan on a single-family home and some multifamily homes.

After this deadline, you have to follow your state’s eviction guidelines, typically giving at least a few days for renters to pay or move out. Along with lenders banning evictions, a few states are enforcing bans on ousting renters who are behind on payments due to the coronavirus. State bans apply to all or most landlords in that area.

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 coronavirus relief through federal or private programs:

  • 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.

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.

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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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