So, your business has outgrown its space and you decide it’s time to move to a new location. Other than physically move, all you need to do is ask your insurance agent to transfer your coverage to the new location, right?
Unfortunately, there is more to it. Aside from acquiring additional contents for your new location, insureds must consider the requirements set forth within the new lease. Many insureds neglect to adequately review their new lease. Not only should the insured review the lease firsthand, but they should send a copy to their insurance agent so they can ensure coverage is satisfactory for both the business and the new requirements. Additionally, it is always recommended that an attorney review the lease.
Within most common leases there are several key areas that address insurance. Some of the note worthy sections include the sections pertaining to the building, tenant improvements and loss of income/ rents.
In regards to the building section, insureds should consider the following:
– Is the landlord responsible for insuring the building and does that include tenant
– How does the lease address equipment used to service the building such as heating, air conditioning and even plumbing?
The latter question is especially important for businesses such as restaurants which might have a walk in refrigeration system, or a dentist which may have extensive plumbing installed, as well as others. They are usually required by the lease to insure those items in the event of a loss. It is imperative to understand the definition of “the building” so both parties to the lease (tenant and landlord) have clarity on who is responsible for insuring what.
Once these issues are defined, the proper insurance coverage can be implemented. Loss of rents and loss of income are other areas of concern in the lease for the tenant.
Some key questions to address with relation to this section might include:
In the event of a loss that could potentially render the property “unfit for occupation”, is the tenant required to continue to pay rent?
Is there mention of a “period of cessation?” Leases typically clarify how the tenant is required to perform after a loss but this needs to be reviewed and understood. Then, the insurance agent can apply the proper coverage.
Before you move your business, have your attorney and insurance agent review the lease.
Then work with your insurance agent to ensure you have the desired coverages in place, and
that you are in compliance with the lease requirements.