Written by: Lindsey Lessard, Director of Client Services, Broker Representative for Alternative Balance
In the world of business, unpredictability is often the only constant. Whether you’re a burgeoning startup or a seasoned enterprise, renting a temporary commercial space exposes you to certain risks, including potential damages to the property. This is where the safety net of “commercial damage to rented premises coverage” comes in. Often part of a standard commercial general liability policy, this insurance provides protection for businesses leasing temporary property. Let’s explore how this coverage works, why it’s important, and why it’s a critical component of your business insurance portfolio.
How Does Damage to Rented Premises Coverage Work, and Why Is It Crucial?
Also known as “tenants’ liability” or “rented premises liability,” this coverage is usually included under the “Damage to Premises Rented to You” section of your commercial general liability policy. The Alternative Balance policy, for example, offers a $300,000 Damage to Rented Premises limit.
When renting a temporary space, accidents causing property damage can occur, such as accidental water spills damaging the floor or a fire or structural damage caused by business operations. While the landlord’s insurance might cover the building itself, it generally doesn’t cover liability for damages caused by temporary tenants. The coverage kicks in if you are legally responsible for fire, water, or other covered damages to a temporarily rented property.
This is where commercial damage to rented premises coverage shines. It covers the costs of damages that your business might accidentally inflict on the rented property, safeguarding your finances from hefty out-of-pocket repair expenses. This coverage is important, as it not only protects your business assets but also fortifies your relationship with the landlord by ensuring prompt and hassle-free damage repair.
What Is Meant By “Temporary”
The term “temporary” in relation to this coverage can often lead to confusion. Many landlords mistakenly believe this coverage applies to the permanently leased location for your business. However, this coverage only applies to spaces rented temporarily for 7 days or fewer. It does not apply to your permanently leased location.
For instance, if you lease a space for a week-long nutrition event and an employee forgets to turn off a stove, leading to fire damage, your policy could help cover the repair costs. If you’re hosting a weekend fitness event at the local YMCA and a barbell damages a wall, that’s something this coverage would apply to.
If you cause property damage to your permanently leased location, then that damage would fall under the policy’s normal per occurrence limit ($2M in the Alternative Balance program).
It’s important to note that the damage to premises rented coverage is not designed to cover your personal property or business assets—that’s what commercial property insurance is for. Also, intentional damages or contractual liabilities are generally excluded.
Points to Consider When Acquiring Damage to Rented Premises Coverage
1. Policy Limits: Analyze your risk exposure by considering the nature of your business operations and choose a policy limit that adequately protects your business’s financial health. A $300,000 limit is typically the industry standard.
2. Exclusions and Conditions: Be keenly aware of the exclusions, conditions, and specified perils covered. Standard policies might not cover incidents like natural disasters, for which separate coverage may be necessary.
3. Additional Coverage: Depending on your business, you might consider additional policies to
complement your existing coverage, such as a business owner’s policy (BOP) or commercial
property insurance. Alternative Balance automatically includes business personal property
coverage in all policies after 7/10/2023.
4. Risk Management: Implement robust risk management strategies to prevent potential damage and avoid insurance claims.
Concluding Thoughts
Having damage to rented premises insurance isn’t just playing it safe; it’s about being smart and thinking ahead. By recognizing that things can go wrong and taking proactive steps to mitigate the financial repercussions of those accidents, businesses demonstrate their commitment to sustainability and integrity. As you navigate the complexities of the commercial rental landscape, this coverage solidifies your foundation, allowing you to focus on what you do best: growing and nurturing your business. Remember, the key to maximizing this coverage is understanding its nuances and ensuring it aligns seamlessly with your overarching business strategy.
Have questions or need help? Email us at [email protected] or call 800-871-3848 Monday-Friday 9am-5pm EST. We’re also here to chat LIVE on our website, www.alternativebalance.com.
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