Your lease already wrote your insurance policy. Most tenants read it afterwards.
The insurance clause in a commercial lease sets your limits, names who has to be added, and decides who pays when the building is damaged. Signing it commits you to cover you may not hold yet, and the landlord will ask for proof before you get the keys.
Start a quote file Read the short answer firstNamed in the lease, not chosen by you.
Landlord added, and often their lender too.
You give up the right to recover from them.
What does a commercial lease require me to insure?
Almost always four things: general liability at a limit the lease names, cover for damage to the space you occupy, the landlord added as an additional insured, and a waiver of subrogation in the landlord’s favour. Many leases add tenant improvements, business interruption, and a requirement to give notice before the policy is cancelled or changed. It is usually one dense paragraph and every line of it costs or saves you money.
This is the door most main street businesses come through, and it arrives at the worst time. The lease is signed when you are opening, the certificate is needed before you take possession, and nobody reads an insurance clause carefully at the same moment they are ordering equipment and hiring staff.
The clause is negotiable far more often than tenants think, and it is only negotiable before signature. Limits get set by habit rather than by the actual risk of the space, and a figure written for a large industrial unit can end up in a lease for a small office because it came off the same template. Once signed you are committed to buying whatever it says, at whatever it costs. Send us the clause with the draft lease and you will get, in writing, what it requires, what it will cost, and which parts are commonly adjusted.
None of them is boilerplate.
The liability limit
A stated amount your general liability must carry. If the number is above what you hold, you buy up or you do not get the keys. This is also where an umbrella often does the work, because raising the base limit costs more than sitting an umbrella on top of it.
Additional insured
The landlord, and frequently their mortgage lender and property manager, added to your policy for liability arising out of your occupancy. It is routine and your broker arranges it. What is not routine is agreeing to insure their own negligence, which some clauses reach for and most insurers will not follow.
Waiver of subrogation
You agree that your insurer will not pursue the landlord even if the landlord caused the loss. Insurers will normally agree to it when asked in advance. They react badly to finding out after a claim, so it has to be on the policy, not just in the lease.
Tenants legal liability
Damage to the premises you rent, which is not your property and is not covered by insuring your own contents. The limit should reflect what it would cost to rebuild the space you occupy. It is one of the most commonly under-set figures on a small business policy.
Three clauses that cost more than the rent that month.
The limit that came off a template
A small studio was handed a lease requiring a liability limit written for a warehouse. Nobody questioned it because it was in the standard document. Raising the base limit cost real money every year for the life of the lease, and an umbrella would have satisfied the same clause for less had anyone asked before signing.
The improvements nobody insured
The tenant paid for the fit-out, the walls, the flooring and the counters. After a fire the landlord’s policy covered the building as it was originally built. The improvements were the tenant’s and had never been added to the tenant’s own policy, because everyone assumed the building insurance covered the building.
The clause that reached too far
The lease asked the tenant to indemnify the landlord for any claim connected to the premises, including the landlord’s own negligence. The tenant’s insurer would not follow that promise. The obligation still existed in the contract, uninsured, which is the worst combination available.
The ones that come up between signing and opening.
The landlord wants a certificate today. How does that work?
Tell us the deadline when you get in touch and we will tell you honestly whether it can be met. A certificate can only be issued once cover is arranged, so the useful thing is to start the conversation when the lease is in draft rather than on the day possession is due.
Does the landlord’s insurance not cover the building?
It covers the building as the landlord owns it. It does not cover your contents, your fit-out, your liability, your income, or your responsibility for damaging the space. Those five are yours, and the lease usually says so in a sentence most tenants read as a formality.
Can I negotiate the insurance clause?
Often, and more easily than tenants expect, particularly the limit and any language asking you to insure the landlord’s own negligence. It is a commercial negotiation like the rent free period. What you cannot do is negotiate it after signature.
What happens when I renew the lease?
Requirements change, and so does the cost of rebuilding the space. Both the liability limit and the tenants legal liability figure are worth revisiting at every lease renewal rather than being carried forward because they were right once.
I work from home and rent a small unit for storage. Same rules?
Broadly yes, and there is a second issue. A home policy generally will not answer a business exposure, so the storage unit and the business activity both need to sit somewhere deliberate. It is a short conversation and it is the most common gap in very small businesses.
Two that the lease clause usually leads to: what general liability does not cover and what an umbrella sits over.
Not the question you had? Send the clause and the question with it through the quote file and you will get a written answer, not a sales call.
Send the clause while the lease is still a draft.
It is one paragraph, it takes minutes to read, and it is the only point at which any of it is negotiable.