Who Insures What in a Commercial Lease?
What Does the Landlord Usually Insure — and What Does the Tenant Insure?
Responsibilities vary by lease, but commercial property arrangements often separate the building owner’s property from the tenant’s business property and operations.
The Building and Owner’s Property
A commercial property owner may insure the building structure and other property the landlord owns, subject to the lease and insurance policy.
Business Property and Operations
A tenant may need insurance for property the business owns or is responsible for, along with liability arising from its operations at the leased location.
Some Property Does Not Fit Neatly Into “Landlord” or “Tenant”
Improvements, fixtures, signs, glass, HVAC systems, and other property may become areas of confusion because ownership and maintenance responsibility can be different.
Flooring, partitions, counters, electrical upgrades, plumbing changes, built-ins, and other improvements may need specific insurance depending on who owns them and who must replace them after a loss.
Exterior signs, awnings, glass, displays, and other property may be owned by the tenant even though they are attached to the leased premises.
Refrigeration equipment, commercial kitchens, machinery, shelving, security systems, or other installed equipment may belong to either party depending on the lease.
A lease may make the tenant responsible for maintaining or repairing certain property even when the landlord retains ownership.
What Insurance Requirements Should Be Reviewed?
Commercial leases often contain an insurance section describing the policies, limits, endorsements, and responsibilities required from the tenant or landlord.
Determine whether the tenant is responsible for business personal property, tenant improvements, glass, signs, equipment, or other property at the premises.
Tenants may need protection for qualifying lost income and continuing expenses if a covered property loss temporarily prevents normal operations.
The lease may require General Liability insurance with specified limits and may require the landlord or property manager to be included as an additional insured.
Landlords may request Certificates of Insurance, additional-insured endorsements, waiver of subrogation, primary and noncontributory wording, or other proof of coverage.
Does Your Commercial Property Insurance Match Your Lease Responsibilities?
Best Formula Insurance can help business tenants and commercial property owners review building coverage, business personal property, tenant improvements, business income, liability requirements, additional insureds, and other insurance obligations found in commercial leases.