Should Property Managers Purchase Interruption Insurance?
Loss of Rents Coverage
When a fire destroyed a fifty unit apartment complex, the owners found themselves in a tough situation. The owners had insurance to cover the repairs and replacement of all the damaged units, and because the agent had done his job the owners had business income, or loss of rents insurance.
The 50 families that no longer had a place to live won’t pay rent until they have moved back into their repaired units. Chances are, many will move on to other housing and won’t come back. However, as owners, you still have expenses, including a mortgage that will need to be paid.
Business Income coverage or loss of rents, is a property coverage that is designed to pay the loss of income (rent is this case) following a total or partial shutdown of a business. Business Income is designed to replicate the insured's income stream and covers expenses as if no loss had occurred
There can be three major parts to Business Income insurance:
- Business income (BI) coverage: Replaces the lost gross earnings during the shut-down resulting from a covered property loss. Loss of rents is considered gross earnings.
- Extra expense coverage: Covers the cost to relocate to another location and continue operations. During relocation, businesses typically incur the extra expenses of rent, equipment lease and the cost of restoring databases. All of this is covered by the "extra expenses" portion of the policy.
- Ordinary payroll: This optional coverage continues paying your workforce while you have no work for them. It prevents your trained employees from accepting other jobs while waiting for your business to recover. This coverage is optional, but is recommended in many circumstances.
Our CIBA Commercial Real Estate Insurance Program is a comprehensive “package product” for most Lessor’s Risk Only (LRO) class properties. CIBA which is an acronym for the Commercial Industrial Buildings Owners Alliance utilizes the underwriting facilities of only the most stable and financially secure carriers available.