Unexpected accidents can happen at your place of business that may cause damage to your unit and possibly a neighbouring unit. Situations like this reinforce the need for Tenants Insurance. Tenants Legal Liability Insurance (TLL), also known as Commercial Tenant Insurance or Tenants Liability Insurance, is a form of Commercial General Liability Insurance that protects your business against the day-to-day risks of running a business within a leased space. Here is a brief overview of what TLL insurance is, what it covers, and why all businesses that rent space should have it.
What is Tenants Legal Liability Insurance?
Tenant’s Legal Liability coverage is insurance for loss or damage to property resulting from an action of a person renting space at that property. When purchased by the tenant, this insurance pays for the cost of the loss or damage caused by the tenant. It protects businesses and renters from financial losses due to accidental damage to the leased property or injury to others while on the property. This differs from a tenant’s contents insurance policy, which covers your possessions within your unit. Additional tenant liability can often provide appropriate coverage to protect against the landlord’s insurer. This policy works even if the tenant is not directly responsible for the accident (i.e., an employee of the rented office unwittingly causes a fire).
Did You Know: TLL coverage helps cover the costs of repairs, legal fees, and settlements if a tenant or their employee is found liable for damages or injuries.
Why does my business need TLL?
Tenants’ Legal Liability is important because the costs of repairing damages (when they happen on commercial property) can easily reach a level that no business can afford.
What it covers
Tenant’s legal liability insurance covers the financial impact of incidents like accidental damage to the leased property (e.g., a fire, water damage), injuries to visitors or other tenants, and lawsuits arising from these incidents.
Why it’s important
It protects tenants from potentially large financial burdens if liable for damages or injuries.
Landlord’s perspective
Landlords may require tenants to have this insurance as part of the lease agreement to ensure they have financial resources to cover damages or legal fees, says ALIGNED Insurance.
Tenant’s perspective
Even if the landlord doesn’t require it, tenants should consider this coverage as it can save them from costly lawsuits and repairs if they cause accidental damage or injury.
Types of coverage
This type of insurance is typically included as part of a broader commercial general liability (CGL) policy. It may also include coverage for tenant improvements and betterments, as well as business interruption in case of a disaster.
Cost
The cost of tenant legal liability insurance varies depending on factors such as the size of the business, location, and the number of employees.
Availability
Tenant’s legal liability insurance is readily available from various insurance providers.
Commercial General Liability (CGL) insurance
Tenant Liability coverage is part of a Commercial General Liability (CGL) policy. Coverage can be related to incidents that occur on your business premises or elsewhere, involving a physical injury, damage to property, or some reputational harm. In a nutshell, CGL insurance enables you to continue your normal operations while dealing with either real or fraudulent claims against your business.
A CGL policy protects your business from lawsuits and medical expenses related to:
- Personal injuries that occur on your property (Bodily Injury Liability)
- Your products or services and/or other property damages resulting from your business operations (Third-Party Property Damage)
- Legal claims of false advertising (Personal & Advertising Injury Liability)
Standard CGL coverage has a number of exclusions, among them is any damage you cause to a property you rent or lease. You need Tenants Legal Liability (TLL) Insurance for this very real risk.
Tenants’ Legal Liability Insurance coverage
While most insurance providers may include this coverage as part of your CGL policy, it is not standard, so you will need to speak to your insurance broker for a better understanding of your coverage. If you do have this coverage on your CGL policy, your limit could be as low as $250,000. Often, TLL included in a commercial policy will not meet the requirements of your lease or sufficiently protect your landlord from their exposure.
How CGL & TLL insurance works together to provide coverage:
- Flooding – Accidental water damage caused by negligence causes extensive damage to your unit and the unit below. Tenants’ Legal Liability insurance will cover the damage to your unit. Damage to properties that you are not renting (the unit below) would be covered by CGL.
- Fire/explosion—A fire or explosion that damages the outer wall of the building. If you rent the entire building, this damage would be covered under TLL.
- Smoke damage – Smoke damage due to employee negligence requires cleaning and repainting costs in your unit and adjacent units. Your CGL policy would cover the damage to the other units, but you would need TLL coverage to pay for the damage to your own unit.
What doesn’t Tenants’ Liability Insurance cover?
Tenant Legal Liability Insurance covers accidental injuries and property damage to third parties.
You will not be covered for:
- Bodily injury to yourself or your employees
- Contractual liability (when one party assumes liability on behalf of another via a contract)
- Intentional or wrongful acts
- Errors and Omissions (you’ll need Professional Liability Insurance)
- Your personal property (look into Contents Coverage or Equipment Breakdown Coverage)
- A product you manufacture or sell (Product Liability would generally offer coverage)
- Third-party damage or bodily injury due to an alcohol-related incident (we recommend Liquor Liability Insurance if you serve alcohol)
How much is Tenants’ Legal Liability Insurance?
You can anticipate spending $250 to $360 annually on a small business’s basic Tenant Legal Liability Insurance policy. As every business is different, the following factors are typically taken into consideration when determining the cost of your premium:
- Average Cost: The average monthly cost for tenant insurance in Ontario, including liability coverage, is between $20 and $30.
- Factors Influencing Cost: The cost can vary based on factors like the coverage amount, business size and location, deductible, number of employees, previous insurance claims, and your insurer.
- Affordability: Liability coverage is generally considered affordable and is typically included within the overall tenant insurance premium.
- Quotes and Comparison: It’s recommended to get quotes from multiple insurance providers to compare prices and coverage options.
- Small Business: A basic tenant legal liability insurance policy might cost a small business around $60 per year.
- Additional Considerations: Factors like the type of business, location, gross revenue, and claims history can also affect the premium for commercial tenant legal liability insurance.
Finding savings for your business insurance needs
Tenant insurance premiums are more affordable than you may think, and there are several ways to reduce the overall cost of your business premiums. Speak with one of our isure representatives to help you cut costs by:
- Bundling
- Comparing quotes
- Choosing only the coverage that you need
- Inquiring about discounts (install a centrally-monitored alarm)
- Being claims-free
- Increasing your deductible
- Paying premiums all at once
FAQS about Tenants’ Liability Insurance
Is TLL insurance necessary in Canada?
Landlords typically do not rely on their tenants’ balance sheet to cover damages tenants could cause to their building. Landlords will require you to provide evidence of TLL coverage via a certificate of insurance that an isure broker can issue on your behalf.
Does my TLL policy cover my company’s property and equipment (computers, furniture, etc.)?
Coverage for your company’s assets and equipment is not provided under a Tenant Liability Insurance policy. The policy is designed to cover a tenant’s legal liability towards the landlord or other third parties. To protect your property and equipment, make sure you add Commercial Property Insurance to your policy.
Am I legally required to have Tenants’ Liability Insurance?
Although you are not legally required to obtain Tenants Liability Insurance, it is common practice for landlords to require their tenants to have insurance coverage before leasing to them. In most cases, tenants are asked to get insured before signing a lease.
Does Tenants Legal Liability cover damages done by my employees to the landlord’s furniture?
Yes. If furniture and fixtures are included in a lease agreement, they would be covered by TLL.
What’s the difference between Tenant’s Insurance and Tenants Legal Liability Insurance?
Tenants insurance usually refers to a policy that a residential tenant would have that would include a certain amount of liability coverage as well as coverage for the tenant’s contents. Tenants Legal Liability is a type of business insurance for businesses that rent space, and it is specifically meant to cover the space that you’re renting if you or your employees cause damage to it.
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