Blog Question: How Best to Insure Outgoings for a Landlord
Just a query in regards to where to include outgoings for Business Interruption for a property owner?
Is it just to be included in the Gross Profit figure as these are normally paid by the Tenant or should it be classed under additional costs?
Thanks in Advance
Daniel [surname and email provided]
It was correct of you to identify this as an issue. While not directly being received by the landlord, should the building become untenable, the landlord has the double whammy of losing their rental income, but now must meet the ongoing outgoings of the property, which under the lease can include rates, land taxes and/or insurance.
As such, it is important to include the amount of the outgoings in the Gross Rentals Sum Insured or Declared Value. Under an ISR there is a Gross Rentals endorsement which moves the cover from a traditional Gross Profit to a coverage designed for a property owner. With a business pack, you typically have a special section for Rent.
Outgoing expenses will typically be included in the test for under insurance and, of course, for the insured to have the full benefit of the coverage, the outgoings need to be included so that the Insured ends up with their same net return as they would had the disruption not occurred.
I hope this adequately explains the situation.