Insurance Considerations for Renting Business Location
Once your client decides to start their own small business, the first step is likely to decide where to operate the business from. This could be conducting business out of the home, purchasing a building or leasing building space from someone else. Read on to learn more about what you need to know when your clients rent business space.
Considerations for Leasing
Leasing building space from someone else means your client 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 your client as the tenant is expected to handle.
Landlord and the Insurance Policy
After your client signs a lease agreement as a tenant, the next step is securing a commercial insurance policy to protect your client’s investment. Take time to understand and review the lease agreement and the small business commercial insurance policy to see how they will (or won’t) complement each other.
The lease may require your client to be responsible for all walls, flooring, ceilings, plumbing and electrical located within the leased space. As the tenant, the insurance policy will not include building coverage. The 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 made make to the building rented or leased, things that serve business purposes, which are part of the building now, and what your client can’t take when they leave.
It’s critical that your client inventory your BPP before a loss occurs.
Consider this example. Your client leases space from a building owner for a cell phone store. An unknown person kicks in the building door causing damage and steals several cell phones with accessories. The 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 your client leases the space and does not own the building nor have building coverage under the insurance policy.
From a liability perspective, any breach of the lease agreement between tenant and landlord will not be covered by the insurance policy as there is an exclusion that will apply.
