What Does Loss of Rental Income Insurance Cover for Apartment Buildings?
- Nate Jones, CPCU, ARM, CLCS, AU
- 5 days ago
- 2 min read
For apartment building owners, rental income is the foundation of cash flow. When a fire, storm, or other covered event forces tenants out, the financial impact can be immediate. Loss of rental income insurance helps protect owners when units become temporarily uninhabitable.
Understanding how this coverage works—and where limits apply—can help you avoid unexpected income loss.
What Is Loss of Rental Income Insurance?
Loss of rental income insurance (also called business income or fair rental value coverage) reimburses apartment owners for lost rent when covered property damage prevents tenants from occupying their units.
This coverage is typically included in apartment building or commercial landlord insurance policies, not standard homeowners insurance.
What Loss of Rental Income Insurance Typically Covers
Covered Property Damage Events
Loss of rental income coverage applies when rent is lost due to a covered peril, such as:
Fire or smoke damage
Wind or hail damage
Water damage from burst pipes
Vandalism
If these events make units uninhabitable, the policy can reimburse the rental income you would have earned during repairs.
Ongoing Expenses
In many cases, coverage helps offset ongoing expenses like:
Mortgage payments
Property taxes
Insurance premiums
This helps owners stay financially stable while repairs are completed.
Repair Period Coverage
Coverage generally applies only during the reasonable repair period, meaning the time needed to restore the building to a rentable condition.
For general guidance on covered perils and insurance terminology, the Insurance Information Institute offers helpful explanations.
What Loss of Rental Income Insurance Does NOT Cover
Market-Related Vacancies
Loss of rental income insurance does not cover vacancies caused by:
Tenant turnover
Poor market conditions
Rent increases
Uncovered or Excluded Events
If damage is caused by an excluded event—such as flooding—coverage may not apply unless you carry a separate flood policy. You can learn more about flood exclusions through FEMA’s National Flood Insurance Program.
Maintenance or Wear and Tear
Losses related to deferred maintenance, code violations, or normal wear and tear are not covered.
Partial Rent Loss Without Damage
If tenants move out for non-damage-related reasons, lost rent is not covered.
Why Apartment Owners Need This Coverage
Apartment buildings face higher risk because:
Multiple units can be impacted by a single event
Repairs may take longer
Rental income is often needed to service debt
Without loss of rental income coverage, owners may be forced to pay expenses out of pocket during extended repairs.
How Wexford Insurance Can Help
At Wexford Insurance, we help apartment owners structure policies that protect both their property and income. We ensure loss of rental income coverage aligns with actual rents, repair timelines, and risk exposure.
