If you rent your business premises and have spent money making updates to the property, who insures those improvements? You do, as the tenant. While a tenant usually isn't responsible for buying buildings insurance (that's the landlords responsibility), the tenant is responsible for covering any improvements they've made to your landlord's property. While exact terms, conditions and coverage can vary from one insurer to the next, here's how tenants improvement insurance basically works.
Insurance definition of tenants improvements
Tenants improvement insurance covers permanent structural or cosmetic changes you've made to a property you are renting. If you as a tenant have spent money improving the business property you're renting or making changes so it's fit for purpose, you can insure these changes through a tenants improvement policy.
Tenants improvement insurance covers cosmetic or structural changes you've made if they're damaged by a covered event like a fire, flood, explosion or vandalism.
The changes covered by tenants improvements insurance become part of your landlord's property, and you wouldn't take with you when you leave. So your furniture wouldn't be covered (that would fall under your contents insurance), but if you updated the bathroom or installed built-in storage shelves or new wooden flooring these changes could be covered by tenants improvements.
Examples of tenants improvements
- Air conditioning
- Fixed flooring
- Permanent cabinets or shelving
When buying tenants improvement insurance you'll be asked the value of these improvements. Just like when you're estimating the value of your contents or stock, you should be as accurate as possible when valuing the cost of your improvements. Failing to insure for the right amount can leave you out of pocket later on.
Many people don't know this, but under insuring your contents insurance or tenants improvements can prove detrimental in an unexpected way. Let's say you have made £50,000 of improvements but you only insure for £25,000. That means you're technically only insured for 50%. So if you make a claim for damage later on, you might only get 50% of the value of any damaged improvements, even if your claim amount falls within the limit of insurance.
What is included in tenant improvements insurance?
Tenants improvements typically covers fixtures, fittings and interior decorations which are fixed to and form part of the structure of your premises. This can include the cost to repair damage to your improvements, and may also include costs incurred trying to find and access the point of a water or heating fuel leak as well as making good any damage caused by these investigations.
Who insures tenant improvements?
The tenant who made and paid for the improvements should pay for tenant improvements insurance. Tenants improvement insurance will be part of the tenant's commercial property insurance, which can also cover contents like furniture and stock. While structural or cosmetic changes might be a part of the landlord's building, improvements made by the tenant are owned by the tenant so the tenant covers them.
A landlord should ensure that the tenant insures any improvements on their own commercial property insurance to make sure these changes are protected in case of a fire, flood or other covered event.