My landlord requires insurance for my hotel — what do I actually need?
A lease on a hotel or motel, or on the land under it, asks for specific coverage, not just "insurance": liability coverage at the limits it names with the owner added to your policy, property coverage on the building and what you own, and often lost-income and liquor coverage. Find the insurance section and its exhibit, match each line to your policy, and send the landlord a certificate with the two required add-ons before you open.
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- The requirements sit in three places: the insurance section, the section where you promise to cover the landlord's costs, and an exhibit at the back. On a leased building, the lease may also make you insure the building itself.
- The landlord's protection comes from two written add-ons to your policy, not from the certificate. Send both with the certificate.
- The limit, the cancellation-notice period and who insures the building are often negotiable before you sign.
Where in the lease are the insurance requirements?
Usually in three places: an insurance section that lists the policies and amounts, a separate section where you promise to cover the landlord's costs if your business causes a claim, and an exhibit at the back with the exact wording. A hotel lease, or a lease of the land under a hotel, often adds a fourth: a clause making you insure the building itself.
Read them together. The promise to cover the landlord's costs, which lawyers call the indemnity clause, is the one your liability insurance has to stand behind. If your policy does not respond to a claim the lease makes your problem, you can end up paying it yourself; check your own policy wording and ask your agent. Most lease agreements require tenants to carry a liability policy. (Source: Insureon) Our general guide to what a landlord can require covers any type of business.
The building clause matters more for a hotel than for most tenants. One industry reference notes that a premises lease may require the tenant to insure the leased building and to name the building's owner as an additional insured on that coverage. (Source: IRMI) If your lease says that, the full cost to rebuild the building belongs on your property policy, not just your furniture. A lender with a mortgage on the property will often have its own list, which reads much the same; the loan documents are the place to look.
What do the insurance words in my lease actually mean?
Three phrases do most of the work: adding the landlord to your liability policy, giving up your insurer's right to go after the landlord, and the two limit numbers. The first two are written changes to your policy that your insurer has to issue. A certificate cannot create them.
- Adding the landlord to your policy. Your liability policy can be extended to defend and pay for the landlord when a claim comes from your hotel's operations. Insurers call that making the landlord an additional insuredAdditional Insured Another person or business covered under your liability policy for claims tied to your work or property, such as a landlord or general contractor. Insurers call them an additional insured. more →. One industry reference defines it as a party the policy does not automatically cover, added at the policyholder's request. (Source: IRMI)
- Giving up the right to go after the landlord. After your insurer pays a claim, it normally has the right to recover the money from whoever caused the loss. The lease asks your insurer to give up that right against the landlord, a waiver of subrogationWaiver of Subrogation A policy add-on where your insurer gives up the right to pursue a party you agreed by contract not to blame after a loss. Insurers call it a waiver of subrogation. more →. The same reference describes it as the insurer acknowledging it has no right to recover from a liable third party. (Source: IRMI)
- The two numbers. A pair such as "$1,000,000 / $2,000,000" means the most the policy pays for one incident, the per-occurrence limitPer-Occurrence Limit The most your policy will pay for a single incident, no matter how many people are hurt or make claims. Insurers call it the per-occurrence limit. more →, and the most it pays for the whole policy year, the aggregate limitAggregate Limit The most your policy will pay for all claims combined during the policy year, no matter how many there are. Insurers call this the aggregate limit. more →. Once paid losses reach the yearly figure, no further payments are made in those categories for that year. (Source: IRMI)
The first two items are each added to your policy as a written change, which insurers call an endorsementEndorsement A written change attached to your policy that adds, removes, or alters coverage partway through the term. Insurers call it an endorsement. more →. Each one is a separate add-on. Having one does not give you the other.
What does a hotel lease usually ask for?
Liability coverage at stated per-incident and yearly limits with the landlord added, property coverage on the building and what you own, income coverage if a covered loss closes you, and often liquor coverage and a promise of notice before cancellation. Your lease names its own amounts; read them, do not assume them.
Liability coverage is the one almost every lease asks for. One commercial-lease explainer calls it "by far the most common insurance coverage required in a commercial lease". (Source: Insureon) Here is what a hotel lease or loan can add.
- Liability limits per incident and per year, on your liability coverage, with the landlord added. A pool is why some landlords and lenders ask for more than the base limit.
- Property coverage on the building and your contents. If the lease or loan makes you insure the building, it belongs on your property coverage at what it would cost to rebuild, with a lender named so loss payments go to it. A mortgage clause is a separate contract between your insurer and the lender: payments go to the lender, and the lender gets advance written notice if the policy is cancelled. (Source: IRMI) Many lenders also ask for flood coverage where the property sits in a mapped flood area.
- Lost income, which is coverage that replaces income and keeps rent or loan payments going while a covered fire or similar loss keeps rooms out of service. Leases and loans often name a number of months. Read it against how long a rebuild would take.
- Liquor coverage, if the hotel pours. Insurers call it liquor liability, and standard liability policies are built to leave it out.
- Notice of cancellation, a set number of days' warning to the landlord before your policy ends.
What should I send back to the landlord?
Send the certificate, a one-page summary of your coverage, together with copies of the two add-ons naming the landlord and waiving your insurer's right to go after them. Not the whole policy, and before you open or close on the lease.
A certificate is evidence that certain types of coverage and limits were bought (Source: IRMI); the landlord's actual protection lives in the add-ons on the policy. Landlords typically ask for the certificate, and without it a lease application will likely be denied. (Source: Insureon) Our explainer on what a certificate of insurance is shows each box on the form and what it proves.
Send a fresh certificate at every renewal and every time you change insurers. A new insurer means new add-ons, and a gap there can put you in breach. Franchise agreements ask for the same paperwork in their own format; our guide to contract insurance requirements for hotels covers those.
What can I negotiate in the insurance clause?
Three things are often worth raising: the limit, the cancellation-notice period, and which side insures the building and the improvements you paid for. The insurance section is easier to change before signing than after.
- The limit. If the lease asks for a high per-incident amount, ask whether your liability limit plus extra liability coverage stacked on top, an umbrella policy, will satisfy it. That is often cheaper than raising the base limit.
- The notice period. Ask your insurer what notice it will commit to before you agree to a number. A lease that demands notice your insurer will not give puts you out of compliance on day one.
- Who insures the improvements. Settle in writing whether your policy or the landlord's covers the renovation, pool, flooring and walls you paid for. Policies vary in whether tenant-made improvements count as building or contents, so the value has to sit in the right place. (Source: IRMI)
The state rules that sit underneath a lease are set out state by state in our guide to hotel insurance requirements by state.
Frequently asked questions about hotel lease insurance
Not usually. The landlord's policy protects the landlord's interest in the property. Your guests, your staff, your contents, your lost income and claims against your business need your own policies, unless the lease says in writing that the landlord insures part of it.
You become the landlord, so the same list works in reverse: ask for a certificate, with your hotel added to their liability policy and the waiver of your right to recover from them if your lease with them requires it. Ask your agent how their coverage fits with yours.
You can sign, but most leases require proof of coverage before you take possession. Send your agent the lease's insurance section and exhibit early, so the quote is built to match it rather than fixed afterward.
Have your lease's insurance section checked against your policy
Include the insurance section and exhibit from your lease, and any loan requirements, with your quote request, so the coverage is built to match what the landlord asks for.