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We've put together a list of frequently asked questions and answers to help you better understand Commercial Real Estate Default Rent Insurance coverage.

  • What is CRERDI?

    CRERDI (Commercial Real Estate Default Rent Insurance), is an innovative coverage for commercial landlords in the US who wish to protect themselves from the risk of their tenants being unable to pay their rent. The policy provides increased financial certainty and security for both landlords and their creditors and investors while evicting the tenant.

  • 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. Landlords 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 landlord 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 landlord. The same applies to owner occupied. Nonpayment of rent between a tenant's subsidiaries or affiliates is excluded from coverage under CRERDI insurance.

  • What is CRERDI for?

    CRERDI is designed to indemnify commercial landlords for losses incurred when a tenant cannot or will not pay rent during the eviction process. Every commercial landlord anticipates experiencing some level of tenant nonpayment, which is often accounted for as a cost of doing business or bad debt. Just as no commercial property would operate without fire insurance, landlords should place equal importance on obtaining CRERDI to safeguard against rental income loss during tenant eviction.

  • Reasons agents and brokers should offer CRERDI coverage to clients

    CRERDI is a gap insurance designed to complement existing traditional property and casualty insurance policies, including LRO (Landlord Risk Option) and BOP (Business Owner's Policy) coverage. By incorporating CRERDI, agents and brokers can enhance their offerings, ensuring clients have comprehensive protection against potential coverage gaps. This not only helps secure the client's assets but also allows agents and brokers to expand their book of business and strengthen client relationships by addressing their unique insurance needs.

  • Why commercial landlords should invest in CRERDI coverage?

    Traditional property and casualty insurance does not cover losses incurred when tenants fail to pay rent. During the eviction process, landlords often face increased financial strain, as they must continue to pay ongoing expenses such as mortgage, property taxes, and maintenance costs, all while not receiving rental income. CRERDI is specifically designed to help landlords maintain a steady stream of rental income while they take the necessary steps to regain possession of the property and secure a new tenant.

  • Coverage Highlights

    • Coverage provided by a non-admitted A.M. Best A+ (Superior) rated carrier.
    • An affordable product. Minimum annual premium as low as $850.
    • An insurance policy issued to landlord - landlords are the first named insured.
    • A gap insurance coverage that minimize the financial losses, to protect the landlord's rental revenue stream.
    • Policy trigger is eviction due to non-payment of rent.
    • 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
    • Multiple properties under one policy.
    • Multiple units per property.
    • Annual policy.
    • Additional insureds. Financial assignee to protect others. ** Required underwriter approval and audit.
    • 30 days tail (window).
    • Aggregate Limit per covered unit.

  • What are the requirements to purchase CRERDI?

    • The landlord must have a current lease with the tenant.
    • Only commercial real estate that is not owned by a governmental entity can be considered.
    • 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). This does not apply to new tenants.
    • Tenant screening report prior to entering the lease agreement. Tenant screening was 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.
    • Rent must be paid in advance.
    • At least one calendar month's rent must be held as a security deposit by landlord.

  • 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?

    YesClick 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?

    YesClick here for some sample of insurance premium.

  • Does the policy cover a periodic lease (month to month)?

    Yes. Yes, CRERDI covers periodic leases, including month-to-month agreements. However, the initial lease term with a tenant must be a minimum of three months. After this initial period, transitioning to a month-to-month lease is acceptable. Please note that coverage does not apply to new tenants who are on a month-to-month lease.

  • Does the policy cover a periodic lease (month to month)?

    Yes. Yes, CRERDI covers periodic leases, including month-to-month agreements. However, the initial lease term with a tenant must be a minimum of three months. After this initial period, transitioning to a month-to-month lease is acceptable. Please note that coverage does not apply to new tenants who are on a month-to-month lease.

  • Can more than one property be insured?

    Yes. There is no limit to how many properties/unites can be insured. Coverage is available to all commercial properties/units regardless of the property size or annual net rental income.
    Landlords 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 properties/units for both Rent Insurance and Tenant Improvements Coverage. You cannot choose different coinsurance percentages for each covered property or unit; only one coinsurance percentage will apply to all covered properties/units under a policy.

  • Can more than one units be insured under one property?

    Yes. There is no limit to how many units can be insured under one commercial property regardless of the units size or annual net rental income.

  • What is CRERDI rent default policy limit?

    Each covered property/unit will have a $50,000 Aggregate Limit that may be used for more than one separate tenant during the policy period.

  • Do I need to insure all of my units at one location?

    Yes. All eligible units at any one location must be insured. ** See owner user (owner occupied) exception.

  • 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 landlord and leasing the other units, coverage will be available only to the leased units that are not occupied by the landlord, subsidiary, or affiliate with the landlord.
    When applying, all units has to be listed, including 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 landlord. 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 landlord or landlord's agent(s), either majority or fully.
    • Any entity where the landlord have an interest in that entity, such as..
      • sister entity
      • parent entity
      • family members owned entity
      • or any related individual(s) to the landlord.

  • When a tenant defaults on the rent, are any reletting (releasing) fees covered?

    No. Reletting (releasing) fees and expenses are not covered. Coverage is for loss of net rent, due to non-payment of rent, and while evicting the tenant.

  • Does CRERDI provide coverage if the tenant breached 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 considered an internal issue between the landlord and tenant and is not covered.

  • What is tenant's leasehold improvements?

    Tenant's leasehold improvements are modifications made to a rental space by either the landlord or the leaseholder to make it more usable for the tenant. This practice is common in commercial real estate, as building owners often undertake these improvements to attract and retain tenants.

    Leasehold improvements typically apply to the interior space, including ceilings, walls, and floors. Modifications to the exterior or common areas of a building are not classified as leasehold improvements; instead, they are considered building improvements.

  • What is covered under tenant's leasehold improvements?

    Tenant's leasehold improvements cover any customized alterations made by a landlord to a rental space as part of a lease agreement, specifically to tailor the space to the needs of that particular tenant. These improvements must not be classified as building improvements.

  • 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 while evicting the tenant. Any other breach of lease, including a court-ordered cancellation, is considered an internal issue between the landlord and tenant and is not covered.

  • Do landlords need to provide documentation while applying or when renewing coverage?

    No. We only require that an application be completed when applying for coverage for the first time. There is no need for additional documentation during renewals unless there has been a change in tenancy.

  • 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.

  • Are buildings or its contents covered under this policy?

    No. Coverage for property damage is typically provided by a Commercial Package Policy or a Standard Fire Policy, and is not covered under CRERDI Policy.

  • Who pays the premium?

    The landlord pays the premium. The insurance policy is issued to the landlord.

  • Is there a discount for landlords insuring more than one property?

    The short answer is No. There is no discount for insuring multiple properties/units.

  • Can this insurance be claimed as a tax deduction?

    Generally, insurance premiums may be claimed as a tax deduction. However, it’s advisable to consult with a tax specialist to understand how this applies to your specific circumstances.

  • Will coverage continue when the tenant moves out?

    Yes. Coverage will continue even if you are looking for a new tenant. We recommend keeping the existing policy in place, as it is a fully earned policy.

  • Does the tenant need to be aware of or approve the coverage?

    No. Similar to your property and liability coverage, you are the named insured of the policy ─ not your tenant.

  • How can I pay for my premium?

    We accept electronic check payments, credit card payments, and premium financing options, which require a 25% down payment followed by 9 or 10 installments. Premium financing is provided by Got Premiums, Inc.

  • 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 by direct debit?

    Yes. Premium can be paid by monthly installments when using premium financing.

  • How are premium paid?

    Premium are due within 10 days from binding.

    Premium can be paid in full via electronic check, credit card, or can be financed with a 25% down paymentt, with the remaining balance financed over 9 or 10 installments. Financing is provided through Got Premiums, Inc. - a 3rd party insurance premium finance company.

    Let's say the premium are $850. When financing, you will be required to pay $369.50 ($ 297.50 + $72.00) down payment, and we will than finance the remaining balance for the amount of $500 in 9 equal installments.

  • What are the processing fees for electronic check, credit cards, and Premium Finance transactions?

    Electronic check transactions of any size are processed at a flat fee of $5 per installment. Credit card payments incur a 4% merchant processing fee. Premium finance fees depend on the policy premium, with an APR ranging from 9% to 12%.

    When using premium financing, the payee will be charged $2.5 for the electronic transaction and $5 per premium finance installment (these finance fees are in addition to the electronic check transaction fees). Please note that premium finance installments are recurring transactions.

  • What is the funding timeline for processed transactions?

    Electronic check payments will take approximately 5 - 6 business days to settle to your bank account. This works in the same way as a paper check where the funds may look good initially but are later pulled back.

  • 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 landlord 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.

  • Do you have to submit a new claim every month that a tenant is in default?

    No. Each month you will receive an email with directions to confirm the status of your claim. The claim verification and payment disbursement will occur on a monthly basis up to the maximum of the policy.

  • 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 cost or 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,
    • landlord is in possession of the rental covered related property,
    • or if covered related property is relet, whichever comes first.

  • What happens if the tenant pays back some money after a claim has been paid?

    If the money paid back to the insured is wholly or partly for specific amounts that have already been recovered under the policy, that amount of money must be returned to the insurer.

  • After experiencing a claim, when should the process of reletting start?

    You are responsible for taking all possible steps to relet the property as soon as possible. You should start the process of replacing your tenant immediately.