Business Property Insurance and Understanding Your Commercial Lease
You understand your business, your customers’ needs and how to provide your customers with the most quality service and products. However, understanding the property insurance provisions in your commercial lease is just as important for your business and plays a significant role in protecting your business’ assets and future.
Having proper property insurance coverage with adequate policy limits protects your investment in the business’ inventory, equipment, supplies, furniture, and fixtures in the event of a casualty, such as a natural disaster or an accident that causes damage or destruction to property. Property insurance for leased space protects the interior of the space and your investment in the improvements to the space.
Reviewing Your Commercial Lease
Often commercial landlords and brokers rely on form leases and for purposes of ease, use the same form used for previous transactions, which may contain out of date property insurance provisions, and fail to provide for proper coverage with adequate limits. Every commercial lease, however, requires a careful review of the provisions as they apply to a specific commercial property and a tenant’s business. Insurance provisions must also correlate to the liability and indemnification provisions of the lease. The types of coverage, which may be included under an umbrella policy, and policy limits, including replacement costs for your business’ assets, will depend on the industry and your particular business.
The type of property insurance coverage will determine the extent of protection in the event of a casualty. For instance, commercial leases often provide that the tenant is required to obtain property insurance in “Basic Form” also known as “Fire and Extended Coverage” or, in some cases, “Broad Form” coverage. However, in some instances, “Special Form” (formerly known as “All Risk”) or “Special Extended Coverage” will provide broader protection. Other property insurance provisions include adding the landlord as an additional insured, indemnification for liability, and waivers of subrogation, under which the parties agree that they will look solely to the insurance providers for payment on claims and the insurance providers will not recover damages from either party to recover the cost of paying out claims.
Insurance provisions in commercial leases are often complex and require legal expertise. Horenstein Law Group is ready to help you with a review of your form lease to ensure the insurance provisions reflects your business needs.
Contact Horenstein Law Group today if you have any questions or concerns about your lease or property insurance coverage for your business.