Do I need commercial property insurance if I lease my space?
Yes, even if you lease your space, you may still need commercial property insurance to protect your business’s contents, equipment, and improvements. Your landlord’s policy generally covers the building, not your business assets or upgrades.
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Complete Guide to Commercial Property Insurance When Leasing
Why This Question Matters for Colorado and Utah Residents
Leasing a commercial space in Colorado or Utah comes with unique property risks—especially given our region’s notorious hailstorms, sudden wildfires, and unpredictable weather. Many business owners assume the landlord’s policy offers sufficient protection, but in reality, that coverage rarely extends to tenants’ belongings or custom improvements.
- Limited Landlord Coverage: Typically only the building’s structure is covered—leaving your inventory, furnishings, and equipment unprotected.
- Regional Risks: Colorado ranks #2 nationally for hail claims, and Utah businesses are increasingly affected by wildfires and localized flooding. A single storm can cause tens of thousands in damage, even to leased spaces.
- Lease Requirements & Legal Compliance: Many Colorado and Utah leases require tenants to carry their own property insurance. This protects your business and helps ensure you meet your legal obligations.
What Most People Get Wrong
Many business owners assume their landlord's policy is enough, or that property insurance is optional for tenants. In practice, these policies almost never cover tenant improvements, inventory, or business interruption after an incident.
Another common pitfall: failing to add critical protections—like business interruption, ordinance/law, or flood coverage—that are excluded from standard policies. Severity and frequency of claims are higher in Colorado and Northern Utah due to hail, wildfire, and occasional spring floods, amplifying these oversights.
The Complete Picture
Even if you don’t own your building, commercial property insurance can cover: your business’s contents (furniture, computers, inventory), any build-outs or improvements you’ve made (like upgraded lighting or kitchen equipment), and lost business income if property damage forces a temporary closure. In Colorado, average premiums for tenant contents coverage range from $800–$3,000/year per $1M of protection, depending on business size and location. Claims are commonly related to hail, theft, burst pipes, or kitchen fires—real risks in our local markets.
Some leases specify minimum coverage amounts or name the landlord as additional insured. Standard policies exclude floods, earthquake, and ordinance/law (for code upgrades)—so review your policy with a local expert. A Business Owner’s Policy (BOP) bundles property and liability for cost savings and simplified management, and is a popular choice among growing businesses in CO and UT.
Making the Right Decision for Colorado and Utah Residents
Question 1: Does my landlord’s insurance actually protect my business?
Nearly always, the answer is no. Landlord policies generally only cover the building’s structure, not your property inside the space.
- Assess your lease to see what you’re required to insure.
- Double-check which items are your responsibility—especially built-ins, decor, or high-value equipment.
Question 2: What specific risks does my business face in this location?
Regional hazards in Colorado and Utah often require extra protection. For example, hail claims cause $67,000+ in damages each season on average in northern Colorado. Flooding after wildfires or rain in Utah can lead to uninsured losses without dedicated flood coverage. Assess your most likely risks with a local agent.
Question 3: How would I cover costs if damage shut me down for days or weeks?
Estimate the business income you’d lose during a restoration period. Business interruption coverage is essential for most tenant businesses, as utility outages, fire, or weather incidents can temporarily shut you down. Consider bundling with a BOP for comprehensive protection and potential discounts.
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Real World Examples
Fort Collins Café: Insuring Beyond the Lease
Background: Emily owns a popular café on Harmony Road, leasing her space.
Coverage: $75,000 in contents coverage, $40,000 for improvements, included in a BOP (Business Owner’s Policy).
Monthly Premium: $105/month ($1,260/year)
The Incident: A spring hailstorm broke skylights, flooding the kitchen and damaging espresso machines, furniture, and inventory.
Total Claim Cost: $23,000 (equipment repairs, lost inventory, restoration)
Emily’s Cost: $1,000 deductible – policy covered the remainder, including expedited replacement of espresso equipment.
"If I’d relied on my landlord’s insurance, I would have lost nearly everything. My business policy saved my livelihood."
Salt Lake City Boutique: Custom Improvements Protected
Background: Hannah leases a downtown Salt Lake boutique, investing heavily in custom lighting and shelving.
Coverage: $60,000 for tenants’ improvements, $90,000 for inventory, bundled with liability coverage.
Monthly Premium: $118/month ($1,416/year)
The Incident: A winter pipe burst ruined imported rugs, product displays, and custom woodwork right before the holiday shopping rush.
Total Claim Cost: $31,500 ($22,000 contents, $9,500 for wall and lighting improvements)
Hannah’s Cost: $1,250 deductible – policy paid for rapid restoration and allowed the store to reopen quickly.
"I learned too late that the landlord’s policy didn’t help me. My own insurance was the only reason we survived the repairs."
Boulder Shared Workspace: Business Income Safety Net
Background: Jake manages a co-working space in Boulder, leasing a large floor with specialized build-outs and electronics.
Coverage: $120,000 for tenants’ improvements, $75,000 for computers/furniture, $50,000 business interruption.
Monthly Premium: $145/month ($1,740/year)
The Incident: Wildfire smoke infiltration forced the building to close for 2 weeks for cleanup and ventilation.
Total Claim Cost: $17,000 (cleaning, equipment service, lost income payouts)
Jake’s Cost: $1,500 deductible – policy made payroll and rent payments while access was restricted.
"Insurance covered our downtime and protected everyone’s livelihood. There’s no way we would’ve kept our members without it."
Avoid These Common Mistakes
Mistake #1: Assuming the landlord’s policy protects your property
What People Do: Many tenants sign leases without securing separate commercial property insurance, thinking the building owner’s policy covers their business contents and improvements.
Why It Seems Logical: Landlords insure the building, so tenants believe that policy should include everything inside.
The Real Cost: After a hailstorm or plumbing leak, tenants often face $10,000–$50,000 in losses for equipment and fixtures that aren’t covered by the landlord’s insurance.
Smart Alternative: Always get a dedicated commercial property policy to protect your business items and build-outs; independent agents like FoCoIns can clarify what’s really at risk and ensure your coverage matches your lease obligations.
Mistake #2: Skipping business interruption insurance
What People Do: Many business owners focus on physical items only and skip business interruption coverage, thinking short closures will have minimal impact.
Why It Seems Logical: It’s tempting to minimize costs if your profit margins are already tight or you feel outages will be brief.
The Real Cost: A two-week closure after fire, water, or storm damage in Colorado or Utah can result in $5,000–$25,000 in lost revenue—sometimes causing permanent closure.
Smart Alternative: Bundle business interruption coverage with your property policy or a BOP for a safety net that keeps your business afloat during repairs or restoration.
Mistake #3: Ignoring excluded risks (like flood or ordinance/law)
What People Do: Tenants often skip reviewing policy exclusions, overlooking the need for supplemental coverage for floods, earthquakes, or required building code upgrades.
Why It Seems Logical: Standard property insurance seems comprehensive, and add-ons feel optional or costly.
The Real Cost: After a wildfire, many Utah and Colorado properties face post-fire flooding or code-mandated rebuilds. Uncovered claims may exceed $20,000–$100,000 for code upgrades or flood restoration.
Smart Alternative: Work with a local expert to review your location’s unique risks and invest in necessary add-ons (flood, ordinance/law, etc.) that close hidden coverage gaps and meet legal requirements.
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