Commercial liability insurance for commercial tenant

Commercial liability insurance for commercial tenant

Rental Property Investor · Dayton, OH · Member since 2022 · 103 posts · 49 votes

Hi BP friends we have a small mixed use property and plan to rent out one of the rooms downstairs to a small business owner and use the rest of space for our own business. We still plan to sign a full commercial lease with the tenant although it is a small space. The space does have its own lock and be separate from our space, in the same building though. We will share the same restroom. In our formal commercial lease, it says tenants need to carry general commercial liability insurance with minimum limits of $1 million for personal injury or death per person, not less than $500,000 for property damage  and list us as additional insured. Just wondering if we should reduce the required amount a bit due to the small size of the space? Anybody has similar experience?  Any thoughts are appreciated! Thank you!

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Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
3y

Liability isn't dictate by property size! It's dictated by risk.

How is a smaller property going to result in less risk?

Logical Property Management4.9446 Reviews
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  • Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    @Robin Evans

    In my experience, even with my small properties, my Business Owner policies have always had a minimum of $1 million of liability insurance. I am not sure if this is how the carriers operate or if this is because my independent agent put it at $1 million, but I have never had a Business Owner policy without $1 million of liability coverage. This being said, I would keep it at $1 million.

  • Jay ThomasPro Member
    Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
    3y

    I recommend being cautious when renting out part of your mixed-use property. It's essential to follow the laws and regulations. Don't rush to reduce insurance coverage based solely on the small size of the space. Consult with an attorney to find a balanced approach that protects both parties. Local zoning laws are crucial to consider too. Seek advice from property owners who've been in similar situations or talk to a property management professional. Being well-informed will help you make the right decisions. Good luck!

  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    3y

    Liability isn't dictate by property size! It's dictated by risk.

    How is a smaller property going to result in less risk?

    Logical Property Management4.9446 Reviews
  • Summerville, SC · Member since 2018 · 553 posts · 252 votes
    3y

    Be sure once tenant gets insured, you are given a copy.  Further, you will need to check periodically on their coverage.  Some tenants either let it lapse, or cancel it later on.

  • Cameron MoorePro Member
    Insurance Agent · DFW, TX · Member since 2021 · 348 posts · 245 votes
    3y

    Not necessary. $1M is prettyy standard! In fact a normal Aggregate is $2M per year. 

  • Summerville, SC · Member since 2018 · 553 posts · 252 votes
    3y

    @Cameron Moore do you know of any reasonably priced CGL carriers?  I'm looking for liability-only in South Carolina

  • Cameron MoorePro Member
    Insurance Agent · DFW, TX · Member since 2021 · 348 posts · 245 votes
    3y
    Quote from @Dave Rav:

    @Cameron Moore do you know of any reasonably priced CGL carriers?  I'm looking for liability-only in South Carolina


     Personally, I am not licensed in SC. But I recommend you find a broker in that area and they will have multiple options. 

  • Rental Property Investor · Dayton, OH · Member since 2022 · 103 posts · 49 votes
    3y

    Thank you all for the valuable input! That absolutely makes sense! If the one room catches fire, the whole building might be in jeopardy! We will put that in the lease and ask for a certificate for record. You all have a great week! 



     

  • Member since 2024 · 3 posts · 1 vote
    2y
    Quote from @Dave Rav:

    Be sure once tenant gets insured, you are given a copy.  Further, you will need to check periodically on their coverage.  Some tenants either let it lapse, or cancel it later on.


     Isn't it a big breach of contract if they let it lapse and don't get it? Like example say their renewal was in January but didnt get it until April (that's 3 months without any coverage) and is grounds for eviction no? I'm not aware of any insurers who would backdate policies months back (maybe a few weeks) I tried looking into this more and found in several different states with supreme courts in different states (NY, Minnesota, Wyoming, Alabama etc) that even a lapse of 1 day poses a potential significant long term liability to the landlord

  • Summerville, SC · Member since 2018 · 553 posts · 252 votes
    2y

    @Peter Anag no need to go that far into the weeds.  If they dont get coverage, thats non-compliance and you can start to take action.

  • Rental Property Investor · Dayton, OH · Member since 2022 · 103 posts · 49 votes
    2y

    @Peter Anag We will get a notice if they stop paying the premium because we request to be additional insured. Then we usually reach out to tenants asking them to resume paying. 

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