It's vital to have the right insurance for a tenant business

One of the most important things for a landlord who rents out a commercial premises is to have the insurance of the tenant business up to date. There are a number of things that you have to look out for with tenant's insurance, and it's vital that you have all the risks included on the policy; otherwise it could end up costing you a fortune if something goes wrong.

Large corporate tenants that lease a number of commercial premises often prefer to have their own fire and theft insurance policy in place. This is because with a number of different locations to insure, it's often much cheaper for them to get insured in this way, rather than paying the landlord for insurance on each premise.

It's important that the tenant's insurance complies with the lender's deed of trust. For example, the level of cover taken out must be in line with what's contained in the deed of trust.

The most inclusive form of coverage for tenant's insurance is the 'Causes of Loss - Special Form', which insures against most risks; and landlords should insist on this type of insurance. However, there are some risks that are not included under this form, including earthquakes, terrorist acts and floods.

If a tenant wants to self-insure - where they decide to pay any damages out of their own money - the landlord should make sure that they have the capital in place to do this. The sum that the landlord and tenant agree for self-insurance should include net assets and be indexed for inflation over the term of the lease.

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