Whether you are leasing office, retail or warehouse space landlords will require that you have property and general liability insurance and have them named as an additional insured. Don’t confuse this with the insurance that the landlord is required to carry on the building itself. You will be required to have your own insurance.
Landlords typically require that you have a minimum of $1 million to $5 million in coverage and sometimes they will also require that you have an umbrella policy on top of that. Landlord insurance requirements ARE negotiable however some more than others. Once you and the landlord have finalized negotiations MAKE SURE you get an insurance coverage quote BEFORE signing a commercial lease.
Because depending on what type of industry you are in and what a landlords minimum insurance requirements are, your insurance costs will vary (higher or lower) and those costs will be a determining factor in which commercial space you decide to lease.
For example say the landlord was requiring that you carry an umbrella policy on top of your general liability and property insurance. The costs will greatly vary between a typical office user vs a contractor. The umbrella policy would be the following form for the General Liability Policy which would have limits.
If you are a “Professional Tenant”, i.e. doctor, tech company, etc. the umbrella policy cost would be lower than a contractors. The professional and contractor both have premises and completed operations however the risk with completed operations for the contractor is higher thus much higher rates. The professional tenant will also have E&O insurance that will cover their insurance for completed operations. A contractor will have general liability with the umbrella following form.
A Contractor on the other hand has completed operations (which occur out in the field at commercial worksites) AND the premises. So the umbrella follows both. What that means is that the umbrella policy for a contractor is significantly higher than that for other tenants such as professional, etc. ……..BECAUSE you cannot separate the two (completed operations & premises). The umbrella policy follows the general liability with premises and completed operations. If the contractor could just get an umbrella on the premises it would not be a big deal, but this will be unobtainable.
This all may sound confusing however BOTTOM line once you have gotten the landlord to agree to the minimum insurance requirements OBTAIN A COMMERCIAL INSURANCE QUOTE BEFORE SIGNING YOUR LEASE! The last thing you want is to find out that your insurance costs are going to be ridiculously high thus impacting your bottom line. One landlord may have higher requirements than another so if insurance costs are too high at one location than you may end up leasing somewhere else. OR if the landlord thought you would not lease from them because of the strict requirements then they may reconsider and lower their minimum requirements.