Commercial Tenant Insurance 101

/ By Cowan Insurance Group

Small business owners often need to rent commercial space to run their businesses. Whether it’s an office, a retail store, or a warehouse, your landlord will likely ask you to provide a certificate of insurance before handing you the keys.

Scratching your head, you recall getting tenant insurance when renting a house or apartment for personal use, but what insurance do you need, and what other things do you need to consider when leasing commercial space? Don’t worry. Our Small Business Solutions team has created a checklist to help you navigate the process:

  • First off, if possible, hire a real estate lawyer to review your commercial lease before signing
  • Confirm if your business is the only tenant or if you’re sharing the space with other businesses
  • Confirm what space you are entitled to use besides the primary area, such as parking, storage, and common areas
  • Confirm who is responsible for on-site lawn maintenance, snow removal, cleaning, and garbage collection
  • Lastly, talk to your broker about the insurance requirement in your commercial lease, understand what limits and coverages you are responsible for, and figure out what additional coverages your unique business needs to be appropriately protected against any risk exposures when operating in the rented space

Now that you know the essential information you need to collect, let’s discuss what insurance you need as a commercial tenant.

Our expert insurance advisors are here to help.

 

Commercial tenant insurance

In most cases, your landlord requires you to get commercial tenant insurance, sometimes called tenant legal liability insurance. Typically included in your commercial general liability (CGL) insurance, commercial tenant insurance covers legal liability for lawsuits and other claims related to third-party bodily injury and property damage in the rented space.

For example, your customer fell on the wet floor in your coffee shop and broke his arm, or a cyclist rode into your front door and destroyed your signage. With proper commercial tenant insurance coverage, your insurer may cover your customer’s medical fees and the cost of a new sign.

Even though commercial tenant insurance is not mandatory, most landlords require their tenants to have it, filling in the gap of what may not be covered in their commercial building insurance for the leased premises. But is commercial tenant insurance all you need when renting commercial space? It depends on the nature of your business operation and how you use the leased space.

Tenant improvements and betterments

If you decide to renovate the space before opening, we recommend getting tenant Improvements and betterments coverage, which insures the value of all completed renovation jobs, including fixtures, additions, installations, etc. For instance, if you spent $30,000 to convert a concrete warehouse into a nail salon and faulty wiring caused a fire that burned the expensive ceiling crown and chandelier, tenant improvements and betterments coverage may pay for replacing the ceiling and lighting.

Business interruption

If your business is struck by a disaster such as theft, fire, flood, or windstorm, forcing it to close temporarily, business interruption insurance may cover the loss of income and your overhead, such as rent, utility bills, and payroll, from the day of the incident until your business reopens.

Equipment and business contents

If you were to imagine picking up your commercial space and shaking it, anything that fell out would be considered your business contents. Unfortunately, commercial tenant insurance doesn’t insure business contents, such as electronic equipment, furniture, or inventory. Adding property insurance to your commercial insurance policy will protect your business contents if they need to be replaced due to unexpected events.

These are a few insurance coverages directly related to renting commercial space. A rule of thumb is that anything related to the commercial tenant’s use needs to be insured by the tenant. So, based on your business size, location, industry, and other factors, you may need extra insurance coverages such as product liability, professional liability, cyber risk, and data breach.

Our Small Business Solutions team specializes in helping small business owners, whatever your niche market is. We take the time to understand the characteristics of your business and provide tailored solutions to meet your unique business challenges.

 

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