Lessors Risk Insurance: What Property Owners Need to Know

You own a commercial building. You lease it to a business. They run their operations, and you collect rent. Simple, right?

Not quite. As a commercial property owner leasing to tenants, you face unique risks that standard property insurance doesn't cover. That's where lessors risk insurance comes in.

If you're a landlord, property manager, or investor with commercial rental properties in Florida, here's what you need to know about protecting your investment.

What Is Lessors Risk Insurance?

Lessors risk insurance (also called landlord insurance) is a specialized commercial property insurance policy designed for property owners who lease their buildings to tenants.

What it covers:

• The building structure (walls, roof, foundation, HVAC systems)
• Loss of rental income if the property becomes uninhabitable
• Liability claims arising from the property (slip-and-fall, negligence, etc.)
• Damage caused by tenant negligence or vandalism

What it doesn't cover:

• The tenant's business property (inventory, equipment, furniture)
• The tenant's business operations or liability
• Intentional damage by the property owner

Think of it this way: Your policy covers the building and your rental income. The tenant's policy covers their business and their operations.

Why Property Owners Can't Rely on Standard Property Insurance

A standard commercial property policy assumes you occupy and operate the building. But when you lease to a tenant, the risk profile changes:

• You lose direct control over day-to-day activities in the building
• Tenants may cause damage (grease fires, water leaks, vandalism)
• If the building becomes uninhabitable, the tenant may stop paying rent—but you still owe the mortgage
• You have liability exposure for the property itself (parking lot injuries, structural defects, etc.)

Lessors risk insurance is designed for these unique exposures. It's a landlord's safety net.

What Lessors Risk Insurance Covers

1. Building Coverage

Your policy covers the physical structure:

• Walls, roof, foundation
• Permanently installed fixtures (plumbing, electrical, HVAC)
• Parking lots, sidewalks, and landscaping (if included)

Common covered perils:

• Fire and smoke
• Wind and hail
• Theft and vandalism
• Water damage from burst pipes or roof leaks

Important: Flood damage requires a separate flood policy. If your property is in a coastal area or flood zone, don't skip it.

2. Loss of Rental Income

Imagine a fire damages your building, and your tenant has to close for three months while repairs are made. They're not paying rent, but you still have:

• Mortgage payments
• Property taxes
• Insurance premiums

Loss of rental income coverage (also called business interruption for landlords) reimburses you for the rent you would have collected during the repair period.

How it works:

• You must have a valid lease agreement
• The loss must result from a covered peril (fire, wind, vandalism, etc.)
• Coverage typically lasts until the building is repaired and the tenant can resume operations (up to policy limits)

This coverage is essential. Without it, you're paying out of pocket to cover your expenses while collecting $0 in rent.

3. Liability Coverage

As a property owner, you're liable for injuries and accidents that occur on your property due to negligence or unsafe conditions.

Examples of landlord liability claims:

• Customer slips on ice in your parking lot (you failed to maintain safe conditions)
• Tenant's employee is injured by a broken stair railing (property defect)
• A visitor is hurt by falling debris from a poorly maintained roof

Your lessors risk policy includes general liability coverage to protect you from these claims. We recommend at least $1 million per occurrence / $2 million aggregate.

Note: Your policy does not cover the tenant's business operations. If a customer sues the tenant for a product defect or service error, that's the tenant's responsibility—not yours.

4. Tenant-Caused Damage

Tenants sometimes cause damage—intentionally or accidentally:

• A restaurant tenant's grease fire damages the kitchen
• A retail tenant vandalizes the property when they leave
• A tenant's plumbing negligence floods the building

Lessors risk insurance can cover these damages, subject to your deductible. However, you'll typically subrogate against the tenant (pursue reimbursement) after the claim is paid.

Pro tip: Require tenants to carry adequate liability and property insurance, and list you as an additional insured. This shifts some of the financial burden to their policy.

What Tenants Should Carry (And Why You Should Require It)

Smart landlords don't rely solely on their own insurance. Your lease agreement should require tenants to carry:

1. General Liability Insurance

• Covers the tenant's business operations, customer injuries, and product/service claims
• You should be listed as an additional insured, which extends coverage to you for tenant-related claims
• Minimum: $1 million per occurrence

2. Property Insurance (Tenant's Contents)

• Covers the tenant's inventory, equipment, furniture, and improvements they made to the space
• Lessors risk insurance does not cover the tenant's business property

3. Business Interruption Insurance

• Helps the tenant pay rent even if their business is shut down temporarily due to a covered loss
• Protects both you (rent keeps flowing) and the tenant (they don't go broke)

Certificate of Insurance: Require tenants to provide proof of coverage before move-in, and annually thereafter. Your insurance agent can review certificates to ensure they meet lease requirements.

Liability Gaps: When You AND the Tenant Are Sued

Here's a common scenario: A customer slips on a wet floor inside your tenant's store and suffers a serious injury. They sue both the tenant (for negligence) and you (for failing to maintain safe premises).

Who's responsible?

• If the wet floor was caused by the tenant's operations (a spill they didn't clean up), the tenant's general liability policy should respond.
• If the wet floor was caused by a leaky roof you failed to repair, your lessors risk policy should respond.
• If it's unclear, both policies may be involved—or both insurers may deny the claim and point fingers at each other.

This is why having tenants listed as additional insureds on your policy (and vice versa) matters. It reduces coverage disputes and ensures claims get paid.

How Much Does Lessors Risk Insurance Cost?

Pricing depends on:

• Building value: The replacement cost of the structure
• Location: Coastal properties and high-crime areas pay more
• Tenant type: A daycare has different risks than an accounting firm
• Claims history: Clean loss history = better rates
• Coverage limits and deductibles: Higher limits and lower deductibles = higher premiums

Typical cost range for Florida commercial properties:

• Small office or retail building: $1,500-$3,500/year
• Larger multi-tenant building: $5,000-$15,000+/year

Shopping with multiple carriers (we work with 24+) can save you 20-30%.

Lessors Risk vs. Vacant Property Insurance

If your building is empty and you're searching for a tenant, your lessors risk policy may not cover it. Many policies exclude coverage for properties vacant longer than 60 days.

Vacant property insurance fills this gap, but it's more expensive and offers limited coverage. The best approach:

• Maintain continuous coverage even between tenants
• Secure the property (locks, alarms, regular inspections)
• Find a tenant quickly

Talk to your agent before a tenant moves out to avoid coverage gaps.

Common Mistakes Property Owners Make

1. Assuming the tenant's insurance covers the building It doesn't. The tenant's policy covers their business. Your policy covers the building.

2. Not reviewing tenant certificates of insurance If your tenant doesn't carry adequate coverage (or lets it lapse), you're exposed. Review certificates annually.

3. Underinsuring the building If you insure your building for $500,000 but replacement cost is $800,000, you'll be underinsured and face penalties in a claim.

4. Ignoring flood risk Standard policies don't cover flood. Florida properties—especially coastal and low-lying areas—need flood coverage.

5. Not updating coverage when property values rise Real estate values and construction costs fluctuate. Review your coverage limits annually.

Get the Right Coverage for Your Property

Whether you own a strip mall, office building, warehouse, or retail space, we'll help you build the right lessors risk policy.

At Greene & Associates, we specialize in commercial property insurance for Florida landlords. We'll review your leases, assess your risks, and compare quotes from over 24 carriers to get you the best coverage at the best price.

Own rental property? Request a quote or call 1-800-252-6885 today.

Don't leave your investment unprotected. Get covered now.