As a commercial lease tenant, you must understand whether insurance is your responsibility or the As a commercial lease tenant, you must understand whether insurance is your responsibility or the landlord\u2019s. This will be set out in your commercial lease, which contains all of the terms agreed between you and the landlord. For example:<\/p>\n\n\n\n
The risk is that any damage, either by you or the landlord, could affect the value of the property, but also your ability to run your business from the premises. This can lead to costly and complex claims, which is why insurance is required both by you and the landlord – for different reasons. This article will explain insurance under a commercial lease, focusing on building and contents insurance. This helps you to understand your insurance responsibilities under the commercial lease.<\/p>\n\n\n\n
The two main types of business insurance associated with business property and commercial leasing are:<\/p>\n\n\n\n
Buildings insurance is insurance for the building as a structure and anything that is part of the building. It covers damage to the building and its design. People may refer to buildings insurance as commercial property or landlord insurance<\/a>. Commercial buildings insurance will usually look at the risks that need insuring, which your lease should detail, and to which you and your landlord agree. It often also includes for the landlord three years\u2019 loss of rent and covers risks such as fire and theft. In addition, the building\u2019s insurance should insure the total reinstatement value, which means the insurance can cover all costs related to repairing and rebuilding.<\/p>\n\n\n\n Buildings insurance does not usually cover items in the building that are not attached to it, such as fixtures and fittings. These are usually covered by contents insurance.<\/p>\n\n\n\n One way to understand this is if you imagine tipping your business premises upside down and taking the roof off. Anything that would fall out of the premises is not part of the building insurance but could be part of your contents insurance.<\/p>\n<\/div>\n\n\n\n Usually, a commercial landlord or the person who is the legal owner of your commercial property is responsible for both arranging and paying the building insurance for your commercial premises<\/a>. This is because they have an \u2018insurable interest\u2019 as the freeholder, landlord or owner. Your landlord is, therefore, the insured party. As a commercial tenant, you do not have an insurable interest towards the building. This obligation will be confirmed in your commercial lease.<\/a><\/p>\n\n\n\n If your landlord is responsible for arranging and paying the building insurance, they will typically pass the cost on to you as the tenant as insurance rent. If you share part of the premises, you will generally pay a portion of the insurance premium which reflects your use of shared parts of the building and the area over which you have the sole occupation. Your lease agreement may detail your insurance cost as part of the service charge or as a \u2018stand-alone cost\u2019.<\/p>\n\n\n\n It is wise to check your landlord’s insurance policy to ensure you are correctly charged and not overcharged. Often, the landlord will be required to give you evidence of the premium amount. You may also have to pay excess on the policy should your landlord make a claim or a deductible (if one applies).<\/p>\n Suppose your actions result in the insurer not paying for specific damages. In that case, you may have to pay that difference or the entirety of the damage if the insurer refuses the claim altogether. As a commercial tenant, you should also be aware of the terms of the business insurance and abide by these, so you do not do something which voids the insurance or increases the premium payable (as you can also be responsible for the increased premium).<\/p>\n<\/div>\n\n\n\n If your lease covers a whole building or unit, you will often pay the full insurance premium. In that case, you and your landlord may have your names on the insurance policy.<\/p>\n\n\n\n When you lease commercial premises, you will bring some business possessions into the property. These are your responsibility to maintain\/repair and fall within your ownership. Accordingly, if something happens to them, you want the insurance coverage to repair or replace them. For example, you may have:<\/p>\n\n\n\n As a commercial tenant, you arrange the contents insurance for contents you have in the business premises where the commercial lease is in place. Contents insurance can cover<\/p>\n\n\n\nWho is Responsible for Insurance?<\/h2>\n\n\n\n
Buildings Insurance<\/h3>\n\n\n\n
Contents Insurance <\/h3>\n\n\n\n
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