Owning and operating a home or building used for commercial purposes requires special planning and protection, especially when it comes to insurance. If you rent a room to a lodger or lease the top floor of your home to a family, you may only need to beef up the liability protection provided in your home insurance policy. But landlords who own multi-unit apartment buildings and commercial spaces need customizable insurance policies to protect their investments, guard against lawsuits and recoup losses when thieves and vandals strike.
What is commercial home insurance?
Commercial property insurance differs from commercial home insurance. Commercial property insurance covers real estate used exclusively for business use. For example, an office building that contains no residential housing is a commercial property. The owner of a commercial property would need commercial property insurance. This type of insurance covers the building’s structure and its fixtures, along with detached structures, like parking garages and maintenance buildings.
If the owner also owns the business that occupies the building, she could purchase a commercial property insurance policy that also covers business equipment, furnishings, inventory and office supplies. A property owner may also need to purchase riders or separate policies to cover commercial vehicles, along with liability insurance to cover legal risks.
Commercial home insurance – more commonly called landlord insurance – covers real estate rented to tenants for residential housing. For instance, the owner of an apartment complex would need landlord coverage.
Some properties include commercial spaces and residential housing. For example, many apartment buildings in New York City and San Francisco feature commercial spaces on the ground floor – occupied by grocery stores, restaurants and retail stores – with one or more residential apartments on upper floors. Usually, a landlord policy can cover mixed-used buildings and commercial buildings. The risks associated with owning any type of commercial building can be complex, so landlords may need several types of policies for comprehensive coverage.
What does landlord insurance cover?
Most landlord policies only cover the building’s structure and other detached structures on the property. For example, if a storm damages the front of an apartment building, a landlord policy would help pay for the damages. A landlord policy may also pay to repair or replace a clubhouse, swimming pool or security wall damaged in a covered loss.
Landlord insurance also offers liability protection. For instance, if a tenant or guest sustains an injury in a common space or elevator, the liability coverage of the landlord policy would help pay medical costs and legal expenses if the victim sues for damages.
Some landlord policies also cover property used in operating the building. For example, if a thief steals a lawnmower from a utility shed, the landlord policy may help pay to replace it. However, landlords sometimes need to buy optional coverages to pay for vandalism and burglary losses.
Typically, landlord insurance doesn’t cover equipment breakdowns. If an elevator fails, the owner’s landlord insurance won’t cover the repair or replacement costs. It also doesn’t cover shared properties or the tenants’ personal property.
Typically, commercial building owners also require their tenants to purchase their own insurance coverage. An apartment lease may require the tenant to carry a renters policy. Likewise, a commercial tenant would need to buy business insurance. Commercial landlords require tenants to purchase their own policies to cover damages they cause to the building, but more importantly for the liability protections provided in renters and business insurance policies. Landlords don’t want to be held responsible for the injured guests of residential tenants or the customers of commercial tenants.
How can one get commercial home insurance?
Most major homeowners insurance companies also sell landlord insurance, including:
If you already have home or business insurance, speak with your agent about purchasing a landlord insurance policy. Oftentimes, you can earn a discount when you purchase multiple policies from the same carrier.
Can my home insurance cover my home office?
Insurers set limits on what they will pay for certain types of personal property. For example, State Farm’s default limit for business property is $ 1,500. Although you can increase the limit, it still might not offer enough protection for expensive computer equipment and office furniture.
Amica offers additional computer coverage, but only as an option. Hippo offers great home office coverage in its standard home insurance policies, with $ 8,000 worth of coverage for computers and storage devices and an additional $ 8,000 for other office equipment.
A standard homeowners policy might provide adequate protection for folks who only use a laptop, printer and telephone in their home office. But people who need additional coverage may need to purchase a rider or endorsement to provide more protection.
Also consider purchasing a small business policy. Some providers offer home insurance and business insurance, making it easy to keep all your coverage under one roof. For example, State Farm sells small business insurance for all types of small businesses, including, medical offices, restaurants, retail stores and wholesale businesses.
Who can qualify for commercial home insurance?
Landlord insurance is for non-owner-occupied properties. For instance, if you own an apartment building but don’t live there, you can purchase landlord insurance. Likewise, if you own a mixed-use building, with apartments and commercial spaces but don’t live in the building, you can qualify for landlord insurance.
If you live in your home and rent part of it to a lodger, you can purchase a homeowners policy. In such cases, you should also purchase umbrella insurance for added liability protection.
Perhaps you own real estate that you rent on a short-term basis to Airbnb or HomeAway guests. For the best protection, you’ll need a home share insurance policy, in addition to your landlord or homeowners coverage. Home share policies cover theft of or damage to your personal property, caused by a guest.
Building owners who provide government subsidized housing must meet special insurance requirements established by the U.S. Department of Housing and Urban Development. HUD insurance requirements can include commercial general liability, commercial property, boiler and machinery and lead-based paint liability coverages, among others.
Bottom line
The way you use your home or building will determine the type of insurance you need. Homeowners with a basic home office can usually rely on their homeowners policy to protect business property such as computers, printers and telecom equipment. If your policy doesn’t provide enough coverage for these types of items, you can increase the limits or purchase a separate small business insurance policy.
Commercial building owners need the protection of a landlord policy. Typically, landlord policies only protect the physical structure of your building and detached structures on the property. A landlord policy also includes liability coverage to pay medical costs and legal expenses when someone sustains an injury in the common area of an apartment building or in a commercial space. To avoid shouldering all liability, landlords usually require apartment tenants to carry renters insurance and commercial tenants to purchase business insurance.
