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Loss-of-Rents Planning Worksheet

A loss-of-rents planning exercise starts with a clearly labeled income basis, documented income, any continuing expenses, and a realistic time to repair, re-lease, or reopen. The worksheet defaults to gross income, so it does not add continuing expenses a second time; an explicit net operating income basis can add documented continuing expenses. It is not actuarial advice or a recommendation of a policy limit.

Key takeaways

  • Choose gross or net operating income before entering the scenario.
  • Under the default gross basis, continuing expenses are displayed but not added again.
  • Use a documented restoration assumption and test a longer recovery scenario.
  • Treat the result as an assumption record, not a coverage recommendation.

Start with the income actually at risk

Use a current rent roll and accounting records to identify annual rental income and other income that may be relevant to the planning question. Choose gross when those fields are top-line income; choose net when they represent net operating income before separately documented continuing expenses. Record concessions, vacancy assumptions, reimbursements, parking, and laundry separately when they materially affect the estimate.

The worksheet does not determine what a policy calls business income, rental value, gross earnings, or covered income. Those definitions vary, and a covered physical loss may be required before an income coverage applies.

Identify expenses that continue

List expenses that may continue while the building is repaired, such as debt service, taxes, utilities, management, security, or other obligations, then distinguish costs that stop or reduce. With the default gross basis, the worksheet displays these expenses but excludes them from the planning amount because gross income already includes them. With the explicit net basis, it adds the documented expenses to net operating income.

  • Use accounting records and the lease structure rather than a generic percentage.
  • Document expenses that can be reduced, avoided, or reimbursed.
  • Revisit assumptions after a major lease, occupancy, or financing change.

Choose a realistic restoration assumption

A recovery period can include adjustment, design, permitting, debris removal, contractor availability, material delays, inspection, tenant improvements, re-leasing, and stabilization. A building that can be repaired physically may still take longer to return to expected income.

An optional extended period can model the time after physical restoration when income is still below expectation. It is a scenario input, not an assertion that an insurance form includes that period.

Review the worksheet with policy documents

Compare the assumptions with the policy's covered cause, waiting period, period of restoration, extended period, sublimits, deductibles, exclusions, and valuation terms. Consider access restrictions, utility interruption, civil-authority provisions, dependent property, and lease obligations only when their policy triggers and facts apply.

Update the worksheet when rents, occupancy, expenses, construction plans, financing, or property values change. Keep dated versions so an advisor can see what the estimate assumed.

Hypothetical: Hypothetical: delayed reopening

A fire-damaged building is physically repaired, but permits and tenant improvements delay reopening. The owner can model a restoration period and an optional extension separately, then ask how the policy addresses each period.

Hypothetical: Hypothetical: continuing expenses

A portfolio owner expects rent to stop while taxes, debt service, and security continue. The owner selects net operating income only when the income figure is already net of operating costs; the worksheet then adds documented continuing expenses. Under gross income, those expenses are displayed but not counted twice.

Questions owners ask

Does the total equal the coverage limit I should buy?

No. It is an arithmetic planning scenario. A policy limit depends on policy definitions, valuation, covered causes, waiting periods, time limits, exclusions, and documented assumptions.

Does loss-of-rents coverage pay after any vacancy?

Not automatically. Income coverage commonly has a covered-loss trigger and other conditions. Review the actual form, endorsements, vacancy terms, and facts.

Should continuing expenses be included?

Select gross when your income fields are top-line amounts; continuing expenses remain visible but are not added again. Select net only when the income fields are net operating income, then add documented continuing expenses. The policy's definitions and conditions still control.

Sources

General educational information, not legal, actuarial, or policy-specific advice. Actual coverage depends on the policy form, endorsements, limits, deductibles, exclusions, jurisdiction, and facts. Submitting information does not bind coverage or guarantee carrier approval.