The difference between loss of rent and consequential loss

A little confusing for many, even in the insurance industry, but something I learned many ‘moons’ ago and something that, if one thinks about it, makes sense.

Firstly, to set the scene: You own a commercial or private property and you rent it out, short term or long term, in effect, you are the landlord. You, sensibly, insure the property and you also opt to cover yourself for the loss of rental income in the event of a major loss which prevents the tenant from using the property. Normally, one would insure for a minimum of 12 months loss of rent, often 36 months for larger properties. Here now lies the question as per the headline.

Many landlords insure their loss of rent under a fire policy. All fine, BUT you need to be aware, the loss of rent is ONLY covered up to the date the property is ‘fixed’ i.e. repairs completed and ready for occupancy. Let’s say that you completed the work after 6 months, but the tenant has had to move out in the interim and has committed to a long-term lease elsewhere, so decides to stay where they are. In this case, your loss of rent claim would be until you replaced that tenant, but your insured claim is only for the period of time the property was uninhabitable.

As such, all JWS landlord clients have their cover under the Consequential Loss (Business Interruption) section, wherein the claim continues until the tenant returns or a new one is found and the rent continues to be received, up to the period shown in your policy.

On the same subject, but now referring to Political Violence & Terrorism, local Kenyan policies have a specific exclusion for ‘loss of market, consequential loss of any kind, loss of leases, etc’ known in the market as ‘loss of attraction’ or ‘loss of enjoyment’. These covers are not available locally, but we have access to these markets at JWS. This cover is vital for landlords in the situation where tenants don’t want to return to the property, as a result of a terrorist attack.

Should anyone require further information on this, please get in touch: Email:[email protected]  or Tel: + 254 (0) 709 455 000.