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Here’s why commercial leases require liability insurance

Commercial leases are extremely common for small businesses of all shapes and sizes, as there’s a variety of benefits to not owning your building or office space.

Despite not being on the hook for any structural costs like replacing a broken toilet or fixing the old elevator in your lobby, your company may be liable for any damages to your office space as a result of your business’s operational activity.

Suppose your type of work causes an electrical fire which destroys part of your office and damages the neighboring offices in your building. If found responsible, your company could be liable to cover the cost of damages, which is why an increasing number of landlords now require small business owners to carry liability insurance policies.

The following explores the process for securing commercial renters insurance, why it’s good for your business in the short term, and how it can protect you in the future.

What is commercial renters insurance?

When it comes to commercial renters insurance, you have several liability policy options at your disposal to protect your business, your employees, and your physical office space. But first, let’s take a minute to clarify what exactly renters insurance is.

Renters insurance is simply the combination of general liability insurance, commercial property insurance, and business income insurance into one Business Owner’s Policy (BOP), which together cover your rented property from all types of possible damages.

Renters insurance is also frequently associated with landlord insurance and business property insurance; however, those types of coverages differ from renters insurance in two main ways:

  • Landlord Insurance: Also known as homeowners insurance, this is a policy purchased by a landlord to help pay for damages to their buildings and other property.
  • Business Property Insurance: This policy helps cover your business by reimbursing you the costs of your material items if they are damaged for a loss, such as by fire or theft.

While renters insurance is similar to landlord insurance and business property insurance, each provides a very different and specific function to either the landlord or you, the renter.

I rent my commercial property from a landlord. So why do I need to buy extra insurance coverage?

While landlords can purchase landlord insurance to help protect them from damages to their property, a landlord insurance policy does not cover the property owner in the event of injuries or accidents occurring in their tenants’ commercial spaces. That’s why many property owners will ask you, the commercial lessee, to carry your own renters insurance policy. By possessing your own renters insurance policy, your landlord will feel at ease knowing their property is covered from both sides of the coin, minimizing the chances that either of you pays out of pocket for an unexpected circumstance resulting in damages.

6 insurance coverages you might need at your rental

There are many types of business insurance coverages that might be beneficial to include in your renters insurance policy. Let’s take a look at the most popular additional coverage options:

  • General Liability Insurance: General liability insurance is one of the most common types of insurance available and covers third-party claims that may arise from your neighboring commercial tenants or customers. The policy offers protection against property damage, medical bills, and bodily injury claims.
  • Commercial Property Insurance: This policy helps cover costs to replace or repair any lost, stolen, or damaged company property, such as your inventory, computers, and other electronic equipment used for your day-to-day operation. Commercial property insurance is actually the combination of business property insurance and business personal property insurance—a policy that protects what’s inside the building—and you can purchase both policies jointly or separately.
  • Business Income Insurance: If your business cannot operate due to damages from circumstances out of your control—such as theft, fire, or wind—business income insurance will help cover your lost income while you’re shut down.
  • Business Interruption Insurance: Similar to business income insurance, business interruption insurance helps cover you if your income is interrupted by an unexpected event causing you to break your lease agreement and miss rent. The difference between this policy and business income insurance is that it is specifically designed for covering your rent.
  • Commercial Auto Insurance: This is an auto policy that helps cover your business vehicles from theft, vandalism, and accidents that may occur as a result of frequently coming and going for business from your landlord’s property or leaving and storing your business vehicles on your landlord’s property.
  • Workers’ Compensation Insurance: Legally required for business owners to possess in most states, workers’ compensation insurance helps cover your employees if they are injured on the job in your office or workspace.

Depending on your business needs, you’ll want to add any of the above policies to your general liability insurance, commercial property insurance, and business income insurance to form a robust Business Owner’s Policy that covers all your renters insurance needs.

How much does commercial property insurance cost?

Commercial property coverage typically varies in cost based on the location of your business, the industry your business is in, and the type of business you’re operating.

Generally speaking, most commercial property insurance policies are cheaper when paired with general liability coverage in the form of a Business Owner’s Policy. The average premium for a Business Owner’s Policy runs around $50 per month or just over $600 annually.

How do I get affordable business insurance online?

Many insurance providers, insurance companies, insurance products, and insurance carriers online can provide you with affordable business insurance. Ultimately, an online insurance agent or your local agent can help you navigate which insurance company is best for your business.

For a name you can trust and a reputation for being quick and easy, check out Huckleberry. Huckleberry offers a variety of different business insurance options that can easily adjust to meet the needs of your specific venture.

Do you need insurance to rent commercial property?

While it’s not legally required, more and more property owners are mandating that tenants possess their own insurance. This not only protects your landlord, but it also protects your business.

How much does renters insurance cost for a business?

The cost of a renters insurance policy is based on your business’s size, the location of your business, and the value of your business’s physical equipment and assets. Again, the general range for your average BOP is $50 per month or just over $600 for the year.

What is the difference between commercial and residential renters insurance?

A few factors separate business renters insurance from residential renters insurance. First, residential renters insurance generally covers you against unforeseen circumstances like theft, vandalism, and fire; however, it does not cover your rental property if your dwelling is used for business purposes. That’s where commercial renters insurance comes in. Commercial renters insurance fills in the gaps of residential and will help cover the elements of your business such as inventory, machinery, and electronics used for business purposes.

What is a deductible?

A deductible is an amount you pay out of pocket after an insurance claim has been submitted. If your deductible is $1,000, that means you pay the first $1,000, and your insurance policy covers the remaining amount after that.

What are the pros and cons of getting renters insurance?

If you’re on the fence about purchasing renters insurance, you must realize the pros greatly outweigh the cons. The pros are that you can go about your day-to-day knowing your office is protected from the unexpected and can breathe easy knowing your landlord will probably be more inclined to have your back since you essentially have theirs by having your own renters insurance policy.

The cons are that you're exposed to a slew of liabilities that were highly preventable if you had purchased a business insurance policy.

Secure renters insurance for your commercial lease with Huckleberry

Purchasing commercial renters insurance is a growing trend amongst business tenants throughout the country. While you have many options to choose from, keep Huckleberry in mind for the latest in renters insurance policies and all of your small business insurance needs.

In less than 5 minutes, Huckleberry can provide you with a comprehensive insurance quote specifically tailored to your company’s unique operation, helping you feel confident taking the necessary risks you need to take for your business to succeed.


Disclaimer

All content on this page is for general informational purposes only and does not apply to any specific case, is not legal, tax or insurance advice and should not be relied upon. If you have any questions about the situation for your small business or the latest information in your state, you should contact an attorney for legal advice, an insurance agent or broker, and/or your state's labor or industry agency, board, commission or department. Please note that the information provided on this page may change at any time as a result of legislative action, court decisions or rules adopted or amended by any state or the federal government.

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