What type of insurance do I need for renting commercially?
Do you plan to rent out all, or part, of your property to a business? Whether you’re renting a multi-story building that you hope to turn into offices, or a ground floor unit to a retailer, you should protect yourself with the right insurance.
While you can often bundle your standard home insurance policy with a regular rental insurance policy, the type of insurance required for a commercial tenant will differ slightly from the regular line of action.. Instead, with a business rental, you will be expected to take out a commercial lines policy.
Commercial policy
When it comes to commercial insurance, each lease is unique, with its own tailored fine print. It is vital that you take note of this and discuss it with your insurer- this will determine your liability as the owner of the building. Usually taking out a commercial lines policy is a two part process: first you sign the offer to lease, then you sign the lease containing details of the negotiations.
As a landlord it is your responsibility to outline your policy within the contract shared with your tenant, and to ensure that there is a mutual understanding between you all. It is vital that you take out an effective rental policy for you and your tenant.
Prepare to negotiate with both your insurer and tenant, as not all parts of the agreement will wash with everyone the first time around.
Furthermore, always make sure that any changes to the contract are made both verbally and backed up with writing.
Tenant’s responsibilities
A commercial lines policy should stipulate that while you, the landlord, is responsible for the building, the tenants are responsible for their own property. It is encouraged that they take out their own renter’s policy to protect their belongings.
It is unique to each lease to what extent a tenant is responsible for repairs. While some agreements put “reasonable wear and tear” repairs on the landlord, as well as those caused by weather or vandalism, any damage caused by the tenant may be classed as their responsibility.
Landlord’s responsibilities
A key aspect of the commercial lease agreement will outline who is responsible for what areas of the building in terms of liability coverage. For the most part, the tenant is responsible for the actual space they occupy. So should someone slip and fall in the area occupied by the tenant, the lease will determine who is accountable.
Typically the landlord’s commercial policy will protect the building should it become the unfortunate victim of fire, natural weather factor, explosion or malicious damage. In most cases, to what extent the landlord is responsible for repairs will be determined in the contract.
Different policies can be negotiated with different insurers, so whether you want to stick with your current home insurance provider, or branch out, there are lots of options to compare.