Insurance to Cover Your Commercial Lease
Insurance to Cover Your Commercial Lease
As a business owner you are challenged with the task of selecting the best property and liability insurance coverage for your business. This is particularly important at the time you are signing a new lease or changing insurance policies within a current lease term. Each lease and insurance policy can be different and both require a thorough review. For example, what is the tenant’s responsibility to insure versus what is the landlord’s responsibility.
As a tenant, you may think that you are only responsible to insure property that you bring into the location. However, lease contracts and insurance contracts can be much more complex.
Commercial Insurance Policies Cover
Commercial insurance policies have the ability to cover property in at least three different ways:
1. Building coverage – the structure of the building: walls, floors, roof, etc
2. Tenant Improvements – cabinets, flooring (ie tile), permanently attached fixtures, etc.
3. Business Personal Property – furniture, equipment, inventory, etc
For a more inclusive, detailed list of how property is classified and covered under your commercial insurance policy, please give us a call or email.
Below are some of the areas that we recommend you review. However, keep in mind that this list may not be all inclusive.
Insurance Coverage You Should Consider:
Insurance for Tenant Improvements and Betterments
Tenant Improvements is an area of particular concern for medical and dental offices. The costs can reach hundreds of thousands of dollars. Whether the landlord is paying for these improvements or not, it is important to carefully review your lease to see what your responsibilities are for insuring them.
If you move into an office that already has a significant amount of tenant improvements, your lease may still require you to insure them even though they were part of the building when you signed the lease. It is very important to let your insurance broker know to add this to your business owners policy.
Insurance for Air Conditioners, Roofs, Exterior Walls and any Other Part of the Building
Many times tenants will let their insurance broker know that they are leasing space but neglect to mention that their lease requires that the practice insure all or certain parts of the structure. If the practice only indicates that it needs coverage for its contents/business personal property (such as exam tables, etc.), it is very likely that there will be little to no coverage extended for claims to the building. Coverage may need to be specifically added.
Recently, most insurance policies have started offering exterior building glass coverage as a coverage extension up to a specified limit if the lease requires the coverage. It is a good idea to verify your coverage and lease requirements, especially if you are in a building that is surrounded by glass.
Flood, Wind, Earthquake, and Other Natural Disasters
Some leases attempt to transfer virtually all potential risk to the tenant. Carefully read the lease and if these items are required, tell you insurance broker because additional policies will likely be necessary.
It is advisable to have an attorney or commercial lease expert review your lease for you.
Questions to Ask Your Insurance Agent and Landlord
- Who is responsible for insuring tenant improvements during the build-out phase?
- Who is responsible for insuring tenant improvements during the term of the lease?
- Does my lease require me to insure items that are permanently attached to the building? Such as glass, AC unit, walls, roofs?
- What causes of loss are you required to cover? For example, flood, wind, earthquake, fire, etc.
Desert Mountain Insurance provides insurance services to commercial customers with a specialization in the healthcare industry. For a list of insurance products recommended for your practice or facility, please give us a call.
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