Are you a PG County landlord and need to learn more about Business Interruption Insurance in Prince Georges County? You came to the right place! When owning a rental property (or properties) it is important to consider all possible scenarios, especially those that could interrupt rental income. COVID-19 is one of these unforeseeable crises that have many considering the need for additional coverage. In addition to the pandemic, things like fires or weather damage can occur unexpectedly. Below we will discuss the difference between regular insurance and Business Interruption Insurance, the cost of this additional coverage and if it makes sense for you and your rental property.
What is Business Interruption Insurance?
Business Interruption Insurance covers what normal insurance doesn’t. Your regular homeowner’s insurance and business insurance will cover the damages themselves, but what about the lost income due to the circumstance that caused damage? That is where Business Interruption Insurance comes in! It covers the lost income of what would have been earned based on current financial statements. Incidents that are covered may include:
- Weather: Windstorms, tornadoes and rain causing flooding are a few examples of weather events that could impact the income at your property. These could cause residents to have to temporarily move-out while the property gets fixed resulting in a drop in rent income. Additionally, these types of weather events could impact your primary place of business, resulting in a loss of other income streams.
- Vandalism: Serious vandalism causing the property or office to shut down for temporary fixes is also covered by Business Interruption Insurance. We don’t just mean graffiti or other cosmetic issues, but rather damage to exteriors, windows and security features that are essential to the building’s function.
- Equipment Damages: Major equipment damages including the HVAC unit or other essential equipment would be covered.
- Civil Authority Ingress or Egress: The COVID-19 pandemic is a perfect example of this. Anytime there are mandatory government shutdowns or curfews in place, the insurance would kick in to help cover loss of income.
What is the cost of Business Interruption Insurance?
Business Interruption Insurance is generally sold as an add-on to your existing property and casualty insurance, and will usually run concurrent to your existing policy. The cost is calculated by assessing risk unique to the area your property is in. If your property is in a PG County neighborhood where vandalism is not uncommon, you may have a higher premium. Fortunately, PG County doesn’t commonly have tornadoes, windstorms or other serious weather-related events, so your premium wouldn’t reflect those concerns. Always check with a licensed insurance agent to ensure you are meeting all insurance coverage guidelines.
Who Pays for it?
If you choose to add a rider to your insurance, the cost may be split between you and the tenant(s). To do so, it’s imperative to have a well-written lease in which this is outlined. In the lease, landlords should state that their tenant must include business interruption insurance in their renter’s policy so that each party can fulfill their lease obligations should an emergency occur.
Bottom Line – Do you need Business Interruption Insurance for your Rental Property?
Now that you’re briefed, are you still wondering “do I really need to purchase this insurance for my rental property?” The answer isn’t black and white. To answer this question, you should analyze your finances, the risk in your associated area, and the cost of insurance. The best thing to ask yourself is, “would my business survive a prolonged closure in the event of an emergency?”
If you’re still unsure, contact a professional property management company in PG County and let an expert guide you!