Lessors own buildings and lease space in those buildings to individuals, businesses, or organizations. You could be considered a lessor, for example, if you own and lease space in a shopping center or office building. When you purchase building space to lease, you immediately take on new risks for the safety of the lessee and their guests. There are also vulnerabilities associated with owning the property itself and the potential for a loss of your investment in certain circumstances. Whether you fully understand all of those risks or not, it is important to work with an independent agent who can help you find complete coverage that protects your investment income for years to come.
Lawsuits – Legal Fees and Liabilities
One risk that looms over the heads of all property owners is the potential for litigation. This is particularly important to consider with regards to guest or tenant injuries and property damages occurring on your premises. While there may be limitations as to what you are responsible for (a judge may not consider you responsible if a guest trips on his untied shoelaces), there are many scenarios in which you might be held financially liable for someone’s losses.
For example, if you fail to fix a large pothole in your parking lot and it results in physical damages to a tenant’s car or their customer’s vehicle, you may be sued for compensation of damages. This would typically be covered under a lessor’s risk only policy. On the other hand, if a third-party, such as a delivery person or contractor, slips and falls on black ice on your covered walkway, it might be your general liability insurance that covers the cost of medical bills, lost wages, and other damages instead. Both situations reveal the need for landlords to carry a balance of both lessor’s risk and general liability coverage.
Qualifying for Coverage
In most cases, a lessor can get a lessor’s risk only (LRO) insurance policy that covers only the lessor’s liability risks associated with tenant safety. To qualify, the insurer may require that a lessor occupy no more than 25 percent of the space in the building being insured. Coverage can extend to property damages and injuries caused by covered events, and it can also include endorsements for additional damages, such as pollution liability coverage.
Typically, a lessor’s risk only insurance policy would include liability insurance to help cover the costs associated with tenant lawsuits. General liability insurance usually covers third-party damages. In some cases, it may be that the tenant is responsible for guest damages, but the lessor is listed in the lawsuit, too. Even if you are innocent of the accusations, having the right coverage can help you pay for your legal fees and accumulated court costs as you defend yourself against litigation. However, many lessors find it necessary to require commercial tenants to carry their own general liability insurance as part of a lease agreement for these purposes.
Other Types of Coverage
Many lessor’s find that they need other types of insurance in addition to their liability protection. An agent here at Burstad Insurance can help you assess your risk exposures and determine if additional coverage is right for you. Examples include:
Business Ordinance Coverage
When municipalities pass new ordinances, it often forces building owners to bring their properties up to code or else face the risk of a shutdown. Doing so can be expensive – particularly if it means tearing down and reconstructing a part of your building. Whether you need to replace all of the electrical wiring in your building or install upgraded plumbing systems, business ordinance coverage can help lessors pay for the changes and restore the property’s condition at the completion of the project.
Commercial Property Insurance
This type of insurance helps protect the investment you’ve made in your property against damages caused by covered events. From fire and vandalism to high winds and hail, it can make it possible to clean-up, repair, or rebuild after disaster strikes. It is often paired with business interruption insurance, which helps pay for ongoing business expenses when your cash flow is interrupted by such an event that leaves your leased spaces uninhabitable.
Supplemental Liability Insurance
When you own rental properties, it is important to carry plenty of liability protection. In addition to high-limit lessor’s risk and general liability coverage, you can also purchase an umbrella policy to help pay for excess damages when the limits on your primary liability insurance are exhausted. This can provide millions of dollars in extended coverage protection, which could mean the difference between keeping your property or losing everything after a devastating lawsuit.
Insurance for Lessors in Wisconsin
If you lease entire buildings or rent out a majority of space in a building you occupy, we want to talk to you about your lessor’s risk exposures. At Burstad Insurance, we understand the challenges you face as a landlord and can help you build a customized insurance portfolio designed to protect your income and assets against a wide range of vulnerabilities. As an independent agency, we can shop for coverage on your behalf, comparing rates and coverage from multiple insurers to find a policy that protects your bottom line.
For more information about lessor’s risk insurance and other types of landlord coverage in Wisconsin, contact our office today. We look forward to serving you soon.