In addition to office rent, commercial office tenants also need to prepare for the unexpected. Most office leases require that the tenant provide a certificate of insurance showing that they have a current insurance policy. This insurance is in place to protect the tenant and the landlord from many things including but not limited to, flooding, theft, natural disasters, and accidents.
Some tenants don't like to have the additional expense for insurance. They don't understand that the amount of exposure they have in a multi-tenanted building if they are liable for damage caused to the building by their employees, visitors or themselves.
The typical office lease will require that the tenant carry commercial property insurance, worker's compensation, general liability, and auto insurance. Some building will require that the tenant also carry flood insurance.
The sheer variety of insurance types, from flood or wind damage insurance to data or records insurance, can be intimidating to businesses in the market for insurance. Most new businesses will need just three or four basic types of insurance: commercial property insurance, general liability insurance, worker's compensation, and auto liability insurance.
Commercial Property Insurance
This type of insurance coverage protects the business from loss or damage to business property. It covers your computers, furniture, inventory, supplies and personal property within the office space. Commercial Property Insurance has three categories, all perils and risk coverage, basic coverage and broad coverage.
Commercial Property Insurance - Basic Coverage protects the business from fire, sprinkler system leaks, riots, vandalism, explosions, and smoke, storms
Commercial Property Insurance - Broad Coverage protects against window damage, water damage or damage from a falling object.
Commercial Property Insurance - All Perils or Risk Coverage includes the coverage in Basic Coverage plus Broad Coverage. In addition, it includes direct physical loss minus any written exclusions and theft.
This type of insurance protects the office tenant from a claim made by a victim of an accident. These claims can be large and have the potential to bankrupt a business.
General Liability Insurance
This protects a business from a fall by a visitor when they are in the lobby. It protects the business from accidents, slander, bodily injuries, false or misleading advertising, cost of defending lawsuits, judgments of settlement bonds. Typically a landlord will require a minimum of one million dollars for a general liability policy.
Professional Liability Insurance
This is insurance that is usually used by businesses or individuals that provide professional services. It is sometimes called errors and omissions insurance. People that tend to carry this type of insurance are doctors, lawyers, CPA's, insurance agents and real estate agents.
Product Liability Insurance
If your business sells a product or produces a product it could be susceptible to damages from that product. This type of insurance protects your business from financial loss if your product causes harm to a person or injury.
Auto Liability Insurance
Insurance that is used for vehicles used primarily for business activities.
Business Owners Policy
This type of insurance includes general liability and property insurance. It also protects against business interruption. This can be very handy if your building has a fire and is closed for two weeks of repair.
I know that the cost of insurance can be tempting to avoid. However, most landlords and lenders will require an office tenant to carry adequate insurance to protect their investment. Each owner has different requirements and may require one or more of the examples above.
Regardless, an office tenant should carry insurance to protect their business. Seek legal advice from your attorney to determine what type of insurance is best for your business. Also, check the insurance clause for your lease to make sure you know what insurance you re required to carry as a tenant in your building. Contact us about Plano office space if you would like more information.