HOW DOES INSURANCE FOR UNPAID RENT WORK?

 By definition, unpaid rent insurance is a protection contract which protects the owner and his property against damage resulting from non-payment of rent. The tenant's obligation is to pay rent to the landlord at the time agreed between the parties, and the landlord's obligation is to protect the property against damage or loss, following non-payment of rent, for as long as the tenant remains in the building. 

In the absence of a loss of rent clause in the lease, the tenant can sue the landlord to enforce the contract, in order to obtain damages for any loss caused by non-payment of rent. The term “unpaid rent insurance” is used to describe a method of reducing the risk associated with an otherwise uninsured tenant’s inability to pay rent.

Loss of rent insurance

The most common way to protect your property against non-payment of rent is to include loss of rent insurance in your rental contract. This insurance is also called “rental loss insurance.” The purpose of this type of insurance is to compensate the owner if the tenant does not respect their obligations. You can also purchase insurance against unpaid rent separately from the rental agreement, which is called “personal liability insurance.” It covers any damage or loss caused by the tenant, whether or not he is in default of payment of the lease.

Unpaid rent insurance: the definition of the contract

The rental contract is the first fundamental agreement of a lease. The tenant agrees to pay rent to the landlord in exchange for the right to use the property for a specified period. When the lease expires, the tenant generally renews it or leaves the premises. Since the tenant owes rent to the landlord, he or she has an obligation to pay the rent even if the landlord does not maintain the property in habitable condition. When this happens, the tenant's obligation is to repair the damage and pay the rent. In the event of non-payment of rent, the landlord can make a claim for damages. This request is protected by rental insurance. If the damage is the result of a covered cause of loss, the insurer will make a claim on behalf of the renter.

What are the main advantages of unpaid rent insurance?

Unpaid rent insurance protects the owner against the risk of loss due to non-payment of rent by the tenant, but this is not the only advantage of this type of insurance. If the property is vandalized, the owner can seek compensation for the damage. This protection may also provide for the replacement of damaged goods. One of the main advantages of this type of insurance is that the risk is shared between the tenant and the owner. Since the tenant is responsible for paying the rent and the landlord is responsible for the property, both parties can benefit.

How do I know if my insurance is valid?

This type of insurance is called “rent insurance” because it only covers losses that occur during the term of the lease. It is therefore not valid if the tenant leaves the property before the lease expires. Therefore, if a tenant does not pay their rent, the owner must first request rental insurance from the insurer. The insurer will pay the landlord for any damage to the building or unpaid rent, and this is the landlord’s only compensation. The owner then has the right to claim payment of the insurance from the insurer. The insurer must pay the owner the full amount of the claim, plus any costs the owner incurred in defending himself.