Insurance Considerations When Renting Your Business Space      

renting your business

Once you decide to start your own small business, your first step is likely to decide where you want to operate your business from. You may decide to conduct business out of your home, purchase a building of your own, or lease building space from someone else. Read on to learn more about what you need to know when renting your business space.

Considerations for Leasing 

If you decide to lease building space from someone else, you will be required to sign a lease agreement. The lease will include Landlord requirements and obligations and tenant requirements and agreements. It is a contract between a building owner and a tenant. 

Be sure to review the contract carefully so you understand what the landlord is expected to handle when something breaks or needs repairs, and what you as the tenant are expected to handle. 

Your Landlord and Your Insurance Policy 

After you start your new small business and sign a lease agreement as a tenant, don’t forget about securing a commercial insurance policy to protect your investment. Take time to understand and review the lease agreement and your small business commercial insurance policy to see how they will (or won’t) complement each other. Your insurance agent can help you understand all the ins and outs of your policy. We also recommend that you consider consulting an attorney, one who can provide a thorough review of your obligations under the lease agreement.  

Your lease may require you to be responsible for all walls, flooring, ceilings, plumbing and electrical located within your leased space. Since you are a tenant, your insurance policy will not include building coverage. Your insurance policy will only provide insurance coverage for your business personal property located within your leased space.  

Business Personal Property 

Business personal property (BPP) refers to personal property owned by a business, including not only items that the business owns and sells to others (i.e., inventory) but everything from office supplies to furniture. BPP also includes improvements you may make to the building you rent or lease, things that serve your business purposes, which are part of the building now and you can’t take with you when you leave. 

It’s critical that you inventory your BPP before a loss occurs. 

Consider this example. You lease space from a building owner for your cell phone store. An unknown person kicks in the building door causing damage and steals several of your cell phones with accessories. Your insurance policy includes business personal property coverage and the stolen property will be covered.  

However, the damage to the door will need to be covered under the building owner’s insurance policy since you lease the space and do not own the building nor have building coverage under your insurance policy. 

From a liability perspective, any breach of the lease agreement between tenant and landlord will not be covered by your insurance policy as there is an exclusion that will apply. 

Speak with an Agent 

As a small business owner, it’s important you understand how a lease agreement and insurance policy will interact with each other as your insurance policy may not cover conditions specified in the lease. 

Be sure to talk with your insurance agent about being a tenant who is renting business space and learn how your insurance policy can protect you from the unexpected. 

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