On leased premises, the most common misconception goes like this: "the building is insured, so we're covered." But building insurance protects the owner's assets – not the company's equipment, stock, or tenant improvements. Let's look at where the line falls.
- The owner typically insures the building – it's their asset.
- The owner's policy does not extend to the tenant's own equipment, machinery, or stock.
- The grey area – tenant alterations, glazing, liability questions – needs clarifying in both the lease and the cover.
What does the owner's insurance protect?
The landlord's building insurance protects the structure and its built-in elements – in other words, the owner's interest. If the building burns down, the owner receives settlement for the building from their own insurer. The tenant's machinery and stock get nothing from this: those are the tenant's own assets, for which the tenant must arrange cover.
It's worth reviewing the lease as well: many leases expressly require the tenant to insure their own assets and activity.
What's the tenant's responsibility?
Three circles take shape on the tenant's side. First is own assets: machinery, equipment, stock – the classic property insurance circle. Second is tenant improvements: developments built into the leased unit (partition walls, flooring, built-in technology) which often legally become part of the building, yet still cost the tenant money if damaged – a separate cover element is needed for this. Third is the liability circle: if the tenant causes damage to the leased unit (for example, a fire starting from a technical fault), that's a liability matter – covered in the article on own damage vs. damage caused to others, with the details falling under felelosseg.biz.
The typical disputes – clarifying in advance is cheaper
Glass breakage: whose glass is the building's shopfront? Water ingress after a storm: the roof is the owner's, the soaked stock is the tenant's – two different insurers, two different cases. Tenant alterations: the new partition wall became part of the building, but doesn't appear in the owner's sum insured. These questions can drag on for weeks at claim time if nobody clarified them in advance.
The practical recipe: it's worth putting the lease's insurance clauses and both parties' cover side by side, once. This is part of the site survey – from both the landlord's and the tenant's side; more on the roles: as landlord or as tenant.
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