Everything You Need to Know About Commercial Landlords Insurance

As the name indicates, commercial property insurance is used to cover any commercial property from such perils as fire, theft, and natural disaster. A variety of businesses, including manufacturers, retailers, service-oriented businesses, and not-for-profit organizations carry commercial property insurance. It is generally bundled together with other forms of insurance, such as commercial general liability insurance.

January 12, 2022

Understanding Commercial Property Insurance

Commercial property insurance essentially provides the same kind of protection as property insurance for consumers. However, businesses can usually deduct the cost of commercial property insurance premiums as expenses. Commercial property insurance generally does not cover losses arising from tenants using the building.

When determining how much a company should pay for commercial property insurance, the value of a business' assets, including the building, is the primary factor. With an increase in the number of natural disasters, weather conditions in the area where the building is located have also become an important factor in determining the cost of commercial property insurance. Commercial insurance rates are generally higher for properties located in the vicinity or inside geographies with significant risk of weather-related catastrophes.

What Can be Included in a Commercial Landlords Insurance Policy?

  • Commercial Property covers costs for repairing or replacing your property and your assets if they are damaged by fire, flood, storms or even by your tenant.
  • Liability covers your legal liability that may occur from ownership of your property causing personal injury to a third party or property damage to property belonging to third parties.
  • Theft coverage protects you in the event that your fixtures, fittings or any furnishings that you have on within the property are stolen.
  • Glass coverage will protect you from costs incurred as a result of accidental or deliberate breakage of your plate glass as plate glass is highly expensive to replace. 
  • Machinery Breakdown covers you for any machinery that breaks down.
  • Loss of Rent covers you if a tenant has moved out and has left the space in need of repairs before you can rent it to the next tenant. This type of Commercial Landlords Insurance will cover your loss of rent while the repairs are being done.
  • Business Interruption covers rent if the unit cannot be rented due to fire, storm, etc in the event that repairs take a while to be completed.
  • Notice of Cancellation coverage requires the tenant’s insurance policy to state that the landlord be notified before the policy can be cancelled.

Factors Considered in a Commercial Property Insurance

  • Location: Buildings in cities or towns with excellent fire protection typically cost less to insure than     buildings outside a city or in areas with limited fire protection.
  • Construction: Buildings made of potentially combustible materials will have higher premiums, while those     made of fire-resistant materials could earn a discount. Fire-resistant interior walls, floors, and doors can help maintain a good fire rating.
  • Occupancy: A building's use also affects its fire rating. An office building will likely rate better than a restaurant or auto repair shop. In a building with multiple tenants, one hazardous occupant will negatively affect the fire rating of the entire building. If a business is in a building with a more hazardous tenant, premiums will be higher.
  • Fire and theft protection: How far are the nearest fire hydrant and fire station? Does the business have a fire alarm and sprinkler system? What about a good security system?

Responsibilities of a Commercial Landlord

Although some consider investing in commercial property as a “passive” form of income, commercial landlords still have many important responsibilities. 

Commercial Landlords must:

  • Maintain the property to be safe and in leasable condition. Common areas must remain clean and attractive to aid in attracting customers to your tenants’ units. 
  • Adequately insure the property. Although it is the responsibility of the tenant to have insurance as well, you should work with them to make sure everything is protected and there are no gaps in coverage.
  • Adhere to any lease conditions and legislation.
  • Make sure all the appropriate safety certifications are in place, such as Fire.


Rights of a Commercial Landlord

As a landlord, you have certain rights as well.  Your tenants have to agree to adhere to certain expectations that include:

  • Paying rent in a timely manner.
  • Abiding by the lease conditions that were mutually agreed upon.
  • You may hold a bank guarantee as security over the property in the event the tenant goes into default.


Peace of Mind

Commercial Landlords Insurance is important for the peace of mind of any business owner.  Commercial Landlords are particularly vulnerable as they take on greater risk by assuming responsibility for the tenants in their property. While you want to assume the best in your tenants, you do not always get the best.  Commercial Landlords Insurance can provide comprehensive coverage against unintentional and deliberate acts by them, as well as damage caused as a result of circumstances out of their control. 

For your commercial investment to be a profitable one, your risks should be limited while also enjoying the ability to generate profitable income. You cannot always foresee and plan for every circumstance as some will just be beyond your control. That is why reducing the risk that you are exposed to with a comprehensive insurance policy is vital so you can fully protect your commercial property, your assets and your tenants.


Final Thoughts

It is imperative for both tenants and landlords to have an in-depth understanding of the rights and responsibilities of each party. They must consider what it means for their rental agreement. This can help both parties to avoid breaking the covenant. It’ll also help ensure that they are protected from legal action. 

No matter the type of property you own, you can count on the experts at Evanco Realty Advisors for the very best in full-service commercial administration. We provide everything you need to minimize your ownership workload and maximize the return on investment for each of your commercial properties. We provide peace of mind to owners; implement excellent property management services that enhance value for landlords.

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