Lost Rental Income Coverage Explained: Is Your Multifamily Policy Missing This?

Nate Jones, CPCU, ARM, CLCS, AU
4 days ago
2 min read

When a fire, storm, or major property loss forces tenants to move out, the financial impact goes beyond repair costs. Lost rental income coverage, also known as business income coverage, is a critical part of multifamily insurance that many apartment owners overlook.

If your multifamily insurance policy doesn’t include this coverage, you could be responsible for covering mortgages, taxes, and operating expenses with no rental income coming in.

What Is Lost Rental Income Coverage?

Lost rental income coverage reimburses apartment owners for missed rent when a covered loss makes units uninhabitable. This coverage is designed specifically for income-producing properties insured under multifamily insurance or apartment building insurance policies.

Covered losses may include:

Fire or smoke damage
Wind or hail damage
Certain types of water damage

The coverage continues until repairs are completed or the policy’s coverage period ends.

The Insurance Information Institute explains how business income insurance helps businesses—including rental property owners—recover after unexpected losses.

What Lost Rental Income Coverage Typically Pays For

Under a properly structured multifamily insurance policy, lost rental income coverage may reimburse:

Monthly rental income from affected units
Mortgage payments
Property taxes and insurance premiums
Utilities and operating expenses

This allows apartment owners to maintain cash flow while rebuilding.

What Lost Rental Income Coverage Does NOT Cover

Even strong multifamily insurance policies have limitations. Lost rental income coverage usually does not apply to:

Vacant units prior to the loss
Maintenance-related closures
Flood damage (unless flood insurance is added)
Pandemic-related shutdowns

Flood-related income loss typically requires a separate policy through the National Flood Insurance Program.

Why Multifamily Owners Often Miss This Coverage

Many apartment owners assume rental income is automatically included in their policy. In reality, lost rental income coverage is often optional or capped at low limits unless specifically added.

According to guidance from the National Apartment Association, income protection is one of the most commonly misunderstood areas of apartment insurance.

How Much Coverage Do Multifamily Properties Need?

The right limit depends on:

Number of units
Average rent per unit
Estimated rebuild time
Local construction costs

A larger property may need 12 months or more of lost rental income coverage to remain financially stable after a major loss.

How Wexford Insurance Helps Protect Your Rental Income

At Wexford Insurance, we help apartment owners review and strengthen their multifamily insurance policies, ensuring rental income is properly protected.

Our team helps you: