For proprietors of leased commercial properties such as apartment complexes, retail hubs, or warehouses, securing lessor's risk-only insurance is imperative for safeguarding your investment.
Often known as landlord or LRO insurance, this coverage becomes invaluable should a tenant file a lawsuit against you for property damage or injuries sustained while on your premises. While commonly bundled with general liability and commercial property insurance, lessor's risk-only insurance stands as a distinct form of coverage, worthy of closer examination.
What does a lessor's risk-only insurance entail?
Picture a scenario where a tenant slips on an icy pathway, resulting in injury, or a fire ravages several of your rental units. Lessor's risk only coverage steps in to cover expenses like medical bills, property renovations, or legal fees associated with tenant-occupied spaces in the event of a lawsuit.
Additionally, typical risks covered by lessor's risk only policies encompass weather-related damages, smoke incidents, vandalism, theft, water-related damages (e.g., burst pipes), and vehicular impacts on the property.
Moreover, LRO insurance policies can be customized to address specific risks pertinent to your business, such as pollution damage or data loss from computer systems, as well as tailored to suit your property layout or space requirements.
However, it's important to note what lessor's risk only insurance doesn't cover.
This form of coverage specifically addresses liability concerning damage or injuries sustained by tenants on your property, excluding damages or injuries involving third parties (covered by general liability) or direct damages to the landlord's property or assets (covered by commercial property insurance).
Consequently, lessor's risk only insurance is often bundled with other forms of coverage to provide comprehensive risk protection, often referred to as a business owner's policy. Furthermore, it's essential to understand that LRO insurance does not extend to damages to a tenant's personal property, necessitating the need for tenants to obtain their own renter's insurance policy.
Moreover, lenders typically mandate lessor's risk only coverage for financed commercial properties, requiring its maintenance throughout the loan's duration.
While lessor's risk only insurance may seem complex for new property owners, it remains a vital form of coverage that shouldn't be overlooked. Consulting with your insurance agent can provide clarity and ensure your property investments are adequately protected.
