A commercial lease almost always tells you what insurance to carry, and signing without checking can leave you in breach or underinsured. Here is what to look for before you commit.
What leases commonly require
Most commercial leases require general liability at a stated limit, name the landlord (and sometimes a property manager or lender) as additional insured, and ask for a waiver of subrogation. Many also make you responsible for insuring your improvements and betterments, the build-out you add to the space, and some require business income coverage.
Where tenants get caught
The common problems are limits below what the lease requires, missing additional insured or waiver endorsements, and assuming the landlord’s policy covers your build-out and contents. It usually does not. Each requirement is specific, and meeting it is about the exact endorsements, not just having a policy.
Read the insurance section before you sign
The insurance and indemnity sections are where the obligations live. Reading them before signing tells you whether your current coverage qualifies or what you would need to add. It is far easier to address before the lease is executed than after.
Questions to ask your advisor
- Do my current limits meet what this lease requires?
- Are the additional insured and waiver endorsements actually on my policy?
- Are my improvements and betterments covered, and to what value?
- Does the lease require business income coverage I do not carry?
- Who else does the lease want named, and are they listed correctly?
What to do
Send the insurance section to your agent and compare it to your coverage. Confirm the limits, the additional insured and waiver endorsements, and whether your improvements are covered. Then sign knowing your coverage actually meets the lease.
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