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What does your commercial lease say about insurance?

When entering into a lease agreement for your commercial space, you will probably spend a significant amount of time negotiating what would make up your rental payment, how to split the responsibilities for common areas and the particulars regarding the space itself.

Once you resolve those issues, you may want to turn your attention to issues of liability. This will help dictate what types of insurance your rental agreement may require you to maintain during the term of the lease. Of course, you want to make sure you have ample coverage for anything that could go wrong, but more than likely, you don't want to spend more than necessary on premiums.

Insuring against damage to property

It may seem obvious that you would need a policy to protect you against damage to the property. The question is what type of policy your landlord may require. A "named peril" policy only covers specific issues such as fire or hail damage. An "all risk" policy covers you no matter what happens.

Insuring against lost income

If something happens and the building becomes uninhabitable, it will obviously affect your ability to operate and, hence, to pay rent. You may consider purchasing a policy that covers the loss of rent, along with a business interruption policy. These policies may help keep you afloat while you are unable to do business because you are unable to occupy the rental space.

Insuring against third-party claims

Liability insurance is crucial, especially when dealing with the public. Your lease may specify a certain amount of general liability insurance, but that may not cover everything you need it to cover. You may want to obtain coverage for employment practices and products liability as well. Essentially, your liability insurance should cover any liability that may arise due to your business and its operations.

Paying for the insurance you need

When it comes to paying for the insurance, you may be able to negotiate those costs based on the type of lease you enter into with the landlord. In most cases, the insurance policies must cover both the tenant and the property owner, which is why you may be able to negotiate payment of the premiums.

Knowing whether you have the right insurance coverage -- and enough of it -- may not be as simple as it sounds. The goal is to protect yourself as much as possible. Sifting through all of the options available to you may seem like a daunting task, but you don't have to do it alone. Relying on the legal resources available to you here in Los Angeles could make your experience less stressful and more satisfying.

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