If you’re a property owner that leases space to office, retail or service-based tenants, lessor’s risk insurance (also known as building owner’s insurance), is essential. Lessor’s Risk protects your business and personal assets from issues if a tenant (or customer of a tenant) sustains bodily injury while on your property and/or if there’s property damage due to a storm, fire, vandalism, or other event.
Say you lease commercial space to a business, and one of their employees falls and breaks his arm. That employee may sue you, as the property owner, for having a pothole in the parking lot that caused him to fall. Standard commercial property insurance would not cover this situation. A property owner without lessor’s risk coverage could face expensive fallout (e.g., litigation and fines) from even a “minor” slip and fall accident onsite.
Tips for property owners who lease out space to businesses:
- Require every tenant to have business liability and personal property insurance. Write this requirement into the lease, and ensure that you, as the property owner, are named as an additional insured on your tenants’ policies. (This provides you with extra protection in the event of a lawsuit.)
- Get complete building coverage,
which extends to:
- All buildings, including warehouses
- Fixtures, including outdoor fixtures
- Permanently installed machinery and equipment
- Parking areas
- Common areas
- Understand what lessor’s risk insurance covers. If damage occurs to the property, tenants, or tenants’ belongings, your policy would cover repairs or replacement. This includes damage due to:
- Natural disasters (e.g., hurricanes and tornadoes)
- Smoke and fire damage
- Rain, wind and lightning damage
- Theft and vandalism
- Know that your lessor’s risk liability coverage will pay the medical bills and care for someone injured on your property, even if it’s a serious disability, dismemberment or death, and protect you from resulting lawsuits. The property coverage will pay for any property repairs or replacements needed after an incident.
- Get Business Income and Extra Expense coverage, which protects you from loss of rental income for up to a year if your building becomes uninhabitable due to a covered loss, such as fire or storm damage.
- Choose appropriate coverage limits. Note: If a tenant’s loss or bodily injury liability exceeds your coverage limits, you’ll be responsible for the difference between the cost of the tenant’s loss and your lessor’s risk insurance limits. Choose the highest limit you can afford to maximize your protection. The amount of coverage you need depends on multiple factors, including the size of your property, the number of tenants, the tenants’ onsite activities, the amount of tenant turnover, etc.
MJ Kelly specializes in Lessors Risk policies for business owners. Our team of expert underwriters, coupled with our access to the industry’s top insurance markets, will offer a customized package for your clients and ensure they have the protection they need and deserve.