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Commercial properties sometimes are not owned by the businesses that occupy them. Sometimes, the property owner is, in effect, the landlord of the building. The various business owners are the tenants. If property damage occurs, therefore, then several different parties might lose out. Who, in these cases, bears the responsibility of covering the costs? Do landlords, tenants or both need property insurance?

The simple answer is that both parties need business insurance that applies to their property. So, if you own the building, you usually are the party responsible for insuring it.

Commercial Property Insurance

Owning a commercial property which you lease to other tenants means you have multiple businesses operating within the same premises. There are assets — such as the building and your personally-owned contents — that are yours. The businesses themselves, however, likely own more than enough assets within the buildings.

If you are the property's landlord, you will likely need:

  • Structure Insurance for the building itself. The coverage should provide you with enough assistance to help you rebuild the structure in case of a total loss.
  • Possessions Coverage to help you pay for the items that belong to you that might get damaged within the structure.

In addition to coverage for your owned property, you will likely need commercial general liability insurance. If you were to accidentally cause damage to third-party property, such as one of your tenant's store contents, then you might have to pay them for the damage.

Since you are the property owner, you might be able to require your tenants to buy insurance of their own. Usually, they will need their own liability coverage, possessions insurance and other policies in line with their operational needs. Keep in mind, tenants likely will not need structure insurance, because they don't own the structure.

Even if both parties have insurance, then questions might still arise when property damage occurs. You might wonder who is supposed to pay for the property damage to each person's belongings.

Understanding Insurance Payments

Suppose that a covered event occurs on your commercial property, such as a fire. In these cases, your insurance coverage will pay for the damage to your assets, like the building and the contents you own. The tenant's own insurance will help them afford the repairs or replacements to their own belongings.

However, should questions arise that you damaged the tenant's belongings (such as by causing the fire through your negligence), then your liability insurance might compensate the tenant for their losses. Likewise, should the tenants cause damage to your property in some cases, then their liability coverage might pay for your own property repairs.

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