Before you sign the commercial lease, look at the fine print to see what kind of liability insurance is required. It’s commonplace for landlords to need at least one form of liability insurance since they don’t want to be financially responsible for anything that happens at their place of business.
It helps to know these coverage types so your business can be insured while you aren’t overcharged on your premiums. In all cases, your commercial tenant insurance policy should be sorted out before the lease is signed.
Why Won’t Landlord Insurance Cover a Leased Commercial Property?
The property or landowner has their landlord insurance, as it’s called. This is meant to help pay for damages to their property, so your leased property is always protected. It’s you, as a business owner, who needs insurance.
The landlord typically handles all the expenses that keep the building running, like utilities and maintenance when needed. Tenants pay their share since it’s included in the rent. Insurance is one of these expenses that both the tenant and the landowner share, depending on their agreed-upon terms.
Commercial insurance will cover you and your business. So, you’d still be covered if your landlord pays for most of the policy.
What Kind of Commercial Insurance Will a Landlord Require?
The most commonly required commercial coverage is general liability insurance, also called public liability or premises liability. Brick-and-mortar locations can only can’t open with general liability coverage of some kind.
Driving a car requires a minimum amount of insurance that covers another if you injure them, as does running a business. If someone is injured in your building, say due to a wet floor, you would be covered against any legal expenses.
The policy would also cover any medical expenses or property damage sustained in the incident. What’s more, say that you run an ad for your business that is found to contain copyrighted material. Your general liability policy covers any libel fees in the legal case against you.
The landlord may not be the only one who requires a general liability policy. The mortgage lenders and client contracts may also need it. Because of this, almost every retail location possesses general liability. That doesn’t offer all the protections that landlord insurance would.
General liability costs an average of $42 monthly, around $500 a year. The property risks and location typically determine the rates.
What Are The Different Types of Commercial Insurance?
These are the types of commercial insurance that would protect you financially in the event someone should suffer from an accident or injury while visiting your business.
The landlord’s insurance policy would cover any damage to the building or property. Landlords will require the mentioned general liability insurance because they want to avoid being responsible for anything happening while your business operates.
Aside from general liability, other commercial insurance that a landlord may require are:
- Business owner’s policy - A business owner’s Policy bundles general liability insurance and commercial property insurance. This would mean that you would be covered for any accidents or injuries with general liability and against any damage to the establishment. Average rates are around $53 per month or $636 annually.
- Business interruption insurance - Landlords often push business interruption coverage because your business is a source of rent money. Suppose you lose business for whatever reason and can’t pay rent. In that case, business interruption insurance will cover your monthly rent until your business is back open. Average premiums are around $40 to $130 per month.
- Commercial auto coverage - If your business uses a company car or truck, your landlord may require you to take out a commercial auto policy for all vehicles used for work. This includes comprehensive and collision coverage with the option to add your landlord as an additional insured. Average rates are around $142 per month or $1,704 per year.
- Worker’s compensation - Workers comp, for short, is a type of government insurance that protects an employee’s pay if they are injured or unable to work for health reasons. They may also be offered compensation. Rates are dependent on where your business is located.
- Plate glass replacement - Your landlord may require you to carry a plate glass replacement if the building has many plate windows. The insurance company will cover the repairs and replacement if they’re broken by accident. The landlord’s insurance would cover a purposeful break.
- Industrial special risk - Special risk insurance protects a high-value asset in your business. This can be the building or equipment essential to running your business. If the asset is lost or broken completely, special risk coverage can help cover the cost of a new one.
What are the insurance requirements for a commercial lease?
In addition to the insurance you and your landlord carry, your commercial property’s lease may have its coverage requirements. Many leases include cross liability for claims against you by someone insured under the same policy –they may be an employee or co-worker. In many cases, property leases also write in fine print that the tenant can’t cancel their policies without consent from the landlord.
The landlord can keep their insurance for personal injury, property damage, liability, and unpaid rent. This can affect a tenant by raising their insurance premiums. Suppose your leasing increases its risk with the insurance company. In that case, you may be required to pay the remainder of the policy.
How do I Extend my Commercial Insurance?
What must be understood about commercial insurance for a rented property is that it has to cover three things on your end –yourself, your leased business, and your landlord. They may request that your commercial insurance be extended by adding their name to the policy. Here are a couple of ways you can do that:
- Additional insured - With your landlord marked as an additional insured, they, too, are covered if someone is injured on your premises. This is the most common practice of extending coverage to landlords.
- Named insured - Additional insured only offers some of the policy benefits to the landlords. If they are named insured, they get 100% of the coverage in the policy.
- Interested party - Your landlord must receive coverage as an interested party. Instead, they are kept in the loop whenever you cancel or change your policy. It helps keep your landlord informed.
- Note interests - By noting your landlord’s interests in your insurance policy, you’re keeping your policy limit in a range they prefer.
Commercial insurance for leased property is a multi-personal process of receiving the proper coverage. Sit down with your landlord and plan it out today!
