Loss of Rent Insurance (Mietausfallversicherung)
Loss of rent insurance compensates the owner of a building for lost rental income when a leased property is temporarily unusable as a result of an insured physical loss.
Comparison profile
- Trigger
- Occurrence
- Insured interest
- The building owner's ongoing rental income for a leased property that becomes uninhabitable or unusable following an insured physical damage event.
- Rating basis
- Annual market rent of the insured property, Number of rental units, Indemnity period, Underlying building risk quality
- Typical limits
- Sum insured based on the locally customary annual rent, with the indemnity period usually capped at 12 to 24 months.
- Typical deductibles
- Time deductible or per-occurrence deductible aligned with the underlying building policy.
- Target segments
- Private landlords, Real estate investors, Property management companies
Insured events
- Fire and explosion
- Escape of water (pipes, plumbing)
- Storm and hail
- Natural hazard damage (where insured under the building policy)
- Other perils covered under the underlying building insurance
Key exclusions
- Losses without an underlying insured building damage event
- Rent shortfall due to vacancy unrelated to an insured event
- Tenant default / non-payment risk (covered under rent-guarantee products)
- War and nuclear energy
- Losses arising after expiry of the indemnity period
Concept
Loss of rent insurance compensates the owner of a leased property for lost rental income during the period in which the property is uninhabitable or unusable as a result of an insured physical loss (e.g., fire, water damage from pipes, or storm), and the tenant is consequently entitled to reduce the rent or terminate the lease.
Relevance as Loss-of-Income Cover for Property Owners
Loss of rent insurance is the counterpart to business interruption insurance for commercial enterprises: while the latter protects the loss of income of a producing business, loss of rent insurance protects the ongoing income of a leased property, thereby safeguarding the owner’s debt-service capacity, particularly for mortgage-financed properties.
Structure and Benefit Period
The sum insured is generally based on the locally customary annual rent of the insured property, with the indemnity period usually limited to twelve to 24 months, corresponding to the expected reinstatement period of the building following a major loss.
Comparison and delineation
Loss of rent insurance is the property owner’s equivalent of business interruption cover: both indemnify lost income following an insured physical damage event, but loss of rent responds to lost rental yield on a leased building rather than a producing business’s gross profit. It is always contingent on, and therefore complements rather than replaces, the underlying building insurance – homeowners building insurance or, in Swiss monopoly cantons, cantonal building insurance – since without covered physical damage to the building there is no insured interruption of rental income. Tenant default or vacancy risk unrelated to physical damage falls outside its scope and requires separate rent-guarantee or credit protection.