You've got questions, we've got answers!
We've put together a list of frequently asked questions and answers to help you better understand CRERDI®'s coverage.
- What is Commercial Real Estate Default Rent Insurance (CRERDI®) and what is it for?
- What is Commercial Real Estate Default Rent Insurance (CRERDI®) is not for?
- Why agents and brokers should offer CRERDI® to their insureds?
- Why should property owners buy CRERDI® coverage?
- Coverage Highlights
- What are the requirements to purchase CRERDI®?
- What are the policy exclusions?
- What types of properties are acceptable?
- Do you have an illustration of benefits and claim scenarios?
- Do you have a sample of insurance premium?
- Does the policy cover a periodic lease (month to month)?
- Can more than one property be insured?
- Can more than one units be insured under one property?
- What is CRERDI® rent default policy limit?
- Do I need to insure all of my units at one location?
- What if I am an owner user (owner occupied)?
- When a tenant defaults on the rent, are any reletting (releasing) fees covered?
- Does CRERDI® provide coverage if the tenant breached the lease?
- What is tenant's leasehold improvements?
- What is covered under tenant's leasehold improvements?
- Does CRERDI® provide coverage if the tenant obtains a court order canceling the lease?
- Do property owners need to provide documentation while applying or when renewing coverage?
- Does commercial general liability insurance have coverage for tenant rent default?
- Who pays the premium?
- Is there a discount for property owners insuring more than one property?
- Can this insurance be claimed as a tax deduction?
- Will coverage continue when the tenant moves out?
- Does the tenant need to be aware of or approve the coverage?
- How do you submit a claim?
- What information do I have to provide when reporting a claim?
- How long will it take to receive payment for a claim?
- Do you have to submit a new claim every month that a tenant is in default?
- What types of legal expenses are acceptable, and what type of documentation will be required?
- How long can loss of rent be claimed?
- What happens if the tenant pays back some money after a claim has been paid?
- After experiencing a claim, when should the process of reletting start?
Table of Content
CRERDI® features, highlights, and eligibility requirements
How to use this guide?
This guide is interactive so that you can easily find the information you need. Simply click on the content section you need information on and you will be taken straight to the relevant section.
Use the in each section to return to the table of content area at any time. You can also scroll through the page of this document or search for key words as required.
What is CRERDI®?
Commercial Real Estate Default Rent Insurance (CRERDI®), is an innovative coverage for commercial property owners in the US who wish to protect themselves from the risk of their tenants being unable to pay their rent.
CRERDI® is designed to indemnify commercial property owners for the losses they suffer when a tenant cannot, or will not, pay rent while evicting the tenant.
Coverage includes up to six months of lost net rent, allowing property owners to start the eviction process without giving up 100% of the rental income, as well as reimbursements of legal expenses associated with the eviction process.
CRERDI®, can also provide reimbursement for the tenant's leasehold improvements once the tenant is removed.
What is CRERDI® not for?
CRERDI® provides many great benefits, but there are three things it is not designed to do:
- It is NOT coverage for imminent losses. Like any insurance product, CRERDI® is intended to cover unexpected losses. As the saying goes, "it is too late to buy fire insurance when the smoke is rolling out the windows". Similarly, CRERDI® insurance cannot be purchased to cover a customer nonpayment situation that has already arisen or a risk about which adverse financial information is already known.
- It is NOT a license to extend credit to bad risks. If a loss results from a lack of due care, it cannot be considered unexpected. And if a loss can be expected, it cannot be insured. Property owners still need to exercise reasonable care when leasing and vetting their potential tenants. Just as wearing a seat belt should not make one feel that it is all right to drive recklessly, having CRERDI® insurance does not mean that a property owner can throw caution to the wind.
- It is NOT coverage that can be used for leasing between subsidiaries or affiliates. If one subsidiary or affiliate of a corporate family fails to pay another company that is owned by the same corporate family, it does not count as a customer nonpayment loss. That is an internal corporate issue, not an issue between a tenant and the property owner. The same applies to owner occupied. Nonpayment of rent between a tenant's subsidiaries or affiliates is excluded from coverage under CRERDI® insurance.
Why should property owners buy CRERDI® coverage?
Traditional property and casualty insurance does not cover losses as a result of tenants not making their rent payments.
Every commercial property owner expects to experience some tenant's nonpayment losses. Those expected losses are planned and accounted for as a cost of doing business ━ bad debt. Virtually no commercial property would go without fire insurance. The same importance should be placed on obtaining CRERDI® to protect against non-payment of rent while evicting the tenant.
During the eviction process, property owners' financial losses may be exacerbated by having to pay ongoing expenses (i.e.mortgage, property taxes, ongoing upkeep expenses) while not receiving rental income. CRERDI® is designed so that a property owner continues to receive rental income while taking the necessary actions to take possession of the property to secure a new tenant.
- Reimbursements of net rental income replacement of 50% or 70% to the maximum of 6 (six) months.
- Reimbursements of attorney's fees and court fees to the maximum of $500.
- Reimbursements of up to 50% of the outstanding tenant's leasehold improvements. Tenant's leasehold improvements is offered as an endorsement
- Affordable coverage. Minimum annual premium as low as $850 for 50% coinsurance, and $1,150 for 70% coinsurance.
- Policy issued to property owner - property owners are the first named insured.
- A gap insurance coverage that minimize the financial losses, to protect the property owner's rental revenue stream.
- Policy trigger is eviction by filing an unlawful detainer, due to non-payment of rent.
- Multiple properties under one policy.
- Multiple units per property.
- Periodic leases. Intial tenancy must be at least 6 months, excluding new tenancy.
- Annual policy.
- Additional insureds. Financial assignee to protect others.
- 30 days tail (window).
- Rent default aggregate limit per covered unit to the maximum of $50,000.
- Tenant's leasehold improvements, an additional aggregate limit per covered unit to the maximum of $50,000.
- Coverage provided by a non-admitted A.M. Best A+ (Superior) rated carrier.
- Coverage is available in all 50 states.
What are the requirements to purchase CRERDI®?
- CRERDI®online application. Property owners DO NOT need to provide lease documents while applying or when renewing coverage unless requested by an underwriter.
- Must have written lease agreement(s) in place.
- Only commercial real estate.
- Rental property must be a full-time commercial rental property. Full-time means the initial tenant lease is for a 6 months minimum. After the initial lease, the terms can be changed to a periodic lease (month-to-month), excluding new tenancy.
- All tenancies within a property to be insured.
- Tenant screening report prior to entering the lease agreement, EXCEPT if tenant(s) has been in the unit for more than 12 months and there have been no delinquent payments. Tenant screening MUST BE performed by an independent screening company
- No tenant's evictions within the last 5 (five) years.
- No tenant's bankruptcies within the last 5 (five) years.
- Rent payments must not have been in arrears during the 9 months prior to the inception date of the policy, excluding new tenancy.
- Rent must be paid in advance.
- At least one calendar month's rent must be held as a security deposit by property owner.
What are the policy exclusions?
- The covered unit is uninhabitable for any reason.
- Failure to pay rent due to tenant's death, disability, military services, or abandonment
- Failure of the property owner or it's agents to comply with the terms of the lease agreement pertaining to the covered unit.
- Any non-compliance with building codes, or with any local, state, or federal statutes or regulations relating to the rental or occupancy of the covered unit including but not limited to any Landlord and Tenant Act or Law.
- Lack of ingress or egress to the covered unit.
- Losses arising, directly or indirectly, whether from natural or man-made disasters including but not limited to storm, flood, hurricane, tornado, earth movement, landslide, tsunami, volcanic activity, land subsidence, or any other disasters as declared by the government.
- Losses arising from political risks.
- Losses arising from governmental action including but not limited to seizure or destruction of property by order of governmental authority.
- War, including undeclared or civil war; warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or insurrection, rebellion, revolution, usurped power or action taken by governmental authority in hindering or defending against any of these.
- Non-binding lease agreements attaching to a lease agreement that are not legally enforceable within the jurisdiction to which it relates.
- Rent payable by a tenant after the Insured is insolvent.
- That part of any debt which constitutes any form of state, local, and government charges and taxes, retention monies, late payment interest, interest charges, and penalties.
- Any dishonest, fraudulent, criminal, or illegal act committed by any Insured.
- Subtenant who subleases or rents all or part of the covered unit from a tenant and does not sign a lease or rental agreement with the Insured.
- Development or improvement made to the covered unit or related property that prevents tenants from occupying the covered unit.
- Loss resulting from any incident of terrorism. Loss or damage caused directly or indirectly by a certified act of terrorism pursuant to the Terrorism Risk Insurance Act is also excluded.
- Loss or damage caused by or resulting from release, discharge, or dispersal of contaminants or pollutants or the cost of cleaning up polluting or contaminating substances.
- Rent for the covered unit is in arrears at the inception date of this policy term.
- The Insured, business partner of the Insured, or a family member of the Insured has an ownership interest with the tenant.
What types of properties are acceptable?
The followings are the type of commercial properties, regardless of the property size or annual net rental income, that are acceptable:
- Office buildings (all classes), including office park.
- Industrial buildings, including industrial buildings park.
- Manufacturing buildings (light and heavy).
- Warehouse/distribution buildings, including fulfillment centers.
- Retail stores, including but not limited to, strip centers, and retail malls.
- Special-purpose, including but not limited to, mix-use properties, car washes, theme parks, bowling alleys, theaters, funeral homes, and community centers.
- Medical buildings, including but not limited to, doctor's office, hospitals, nursing homes, clinics, and urgent care.
- Indoor agricultural buildings.
- Flex space, including but not limited to data centers, call centers, showrooms, and laboratories.
- Hotels and motels.
Do you have an illustration of benefits and claim scenarios?
Yes. Click here for Benefits and Claim Scenarios illustration. We also available by telephone at (818) 572-0282 should you have any questions.
Do you have a sample of insurance premium?
Yes. Click here for some sample of insurance premium.
Can more than one property be insured?
Yes. There is no limit to how many properties can be insured. Coverage is available to all commercial properties regardless of the property size or annual net rental income.
Property owners can have multiple properties under one policy through a scheduled location.
Only one coinsurance percentage may be selected per policy. That coinsurance percentage will be used for all covered units for both Rent Insurance and Tenant Improvements Coverage. The Named Insured is not allowed to pick different coinsurance percentages for each covered unit.
What if I am an owner user (owner occupied)?
If the property is a multi-unit property, and one or more of the units is occupied by the property owner and leasing the other units, coverage will be available only to the leased units that are NOT occupied by the property owner, subsidiary, or affiliate with the property owner.
When applying, all units has to be listed, including property owner's occupied unit(s). However, we DO NOT CHARGE premium for these units.
CRERDI® is not coverage that can be used for leasing between subsidiaries or affiliates. If one subsidiary or affiliate of a corporate family fails to pay another company that is owned by the same corporate family, it does not count as a customer nonpayment loss. That is an internal corporate issue, not an issue between a tenant and the property owner. The same applies to owner occupied. Nonpayment of rent between a tenant's subsidiaries or affiliates is excluded from coverage.
Other similar exclusions are:
- An entity that is controlled by the property owner or property owner's agent(s), either majority or fully.
- Any entity where the property owner have an interest in that entity, such as..
- sister entity
- parent entity
- family members owned entity
- or any related individual(s) to the property owner.
What is tenant's leasehold improvements?
Tenant's leasehold improvements are modifications made by the property owner or the leaseholder to render the space more usable for the tenant.
Tenant's leasehold improvements are a common practice in commercial real estate spaces where building owners want to attract and retain tenants. These improvements may also be provided as part of a new lease negotiation.
Tenant's leasehold improvements are applied to the interior space, such as the ceilings, walls, and floors. Modifications to the exterior and/or common area of a building are not considered tenant's leasehold improvements - they are considered Building Improvements. Building improvementsare not covered.
Does CRERDI® provide coverage if the tenant obtains a court order canceling the lease?
No. Coverage is ONLY for loss of net rent, due to non-payment of rent, and while evicting the tenant. Any other breach of lease is an internal issue between the property owner and the tenant, and therefore is not covered.
Does commercial general liability insurance have coverage for tenant rent default?
No. Commercial general liability insurance policies cover specific perils, such as, bodily injury, personal injury and property damage caused by the business operations, products, or injury that occurs on the business premises. These policies generally do not provide coverage for loss of rent caused by tenant default.
How can I pay for my premium?
We accept electronic check payments via phone, fax, and or online as well as premium financing. Premium financee services is provided through got premiums?®.
Are these transactions secure?
Yes. We don't store any electronic payment information. Once a payment has been made, verified, and processed, we then expunge the data from our system.
We go through an annual audit of our systems and processes to ensure we are doing everything possible to keep you and your insureds' information secure at all times.
Can premium be paid monthly?
Yes. Premium can be paid by monthly installments when chossing premium financing. Premium financee services is provided through got premiums?® - an insurance premium finance company. You will be automaticlly appointed with got premiums?®.
How are premium paid?
Premium are due within 10 calendar days from request to bind date.
Premium can be paid in full via electronic check or can be premium financed with a 35% down payment and with the remaining balance spread over 9 installments. Premium financee services is provided through got premiums?<® - an insurance premium finance company.
What happens when an ACH transaction is being rejected?
In the case of electronic check transaction being rejected for NSF, submission error, or other bank related return reasons we notify the agent and the payer immediately by email, and at our discretion, resubmit the electronic check debit transaction within thirty (30) days. A return item charge, for the amount of $35, will be assessed for each transaction that payment is rejected or returned from the Payer's authorized financial institution.
How do you submit a claim?
Our claim process is simple and straightforward. Claims can be reported on-line.
Click here to our Initial Claim Form. Upon completion of the Initial Claim Form we will contact you within one business day. A conformation email along with instructions will be sent to you upon completion of the first notice.
What information do I have to provide when reporting a claim?
- A copy of the lease for the rental unit at the time of the rent default.
- Evidence of the pre-lease screening checks on the tenant of the rental unit substantiating that the tenant met the screening criteria outlined in the policy.
- Copies of notices sent or served by the property owner or its agent regarding non payments of rent.
- Copies of any legal documents relating to eviction proceedings.
- Receipts or invoices to substantiate any legal expenses.
- Any other communication, such as emails, relating to the rental unit at the time of the rent default.
How long will it take to receive payment for a claim?
Once you complete and submit the Initial Claim Form and provide us with all supported documentation, we will respond within one business day.
Your policy has a 30-day waiting period before the first payment is being processed. You will receive an email asking you to confirm that your tenant is still in default. Once verification has been received, your claim check will be sent out for the upcoming month.
What types of legal expenses are acceptable, and what type of documentation will be required?
Any expense associated with the eviction process of your tenant is accepted as legal expense. Examples are court fees, attorney fees, or processing fees. We will require invoices or receipts of paid legal expenses by you or your agent.
How long can loss of rent be claimed?
Monthly claims reimbursements will continue monthly until payments reached the maximum coverage amount
- of up to six (6) months of net rental amount,
- aggregate policy limit amount,
- property owner is in possession of the rental covered related property,
- or if covered related property is relet, whichever comes first.