My landlord requires insurance for my warehouse — what do I actually need?
A warehouse lease asks for specific coverage, not just "insurance": liability coverage at set limits with the landlord named on it, property coverage on your stock and racking, and often lost-income coverage. Find the insurance section and its exhibit, match each line to your policy, and send the landlord a certificate plus the written add-ons.
- Your landlord, and often the landlord's lender, will have specific insurance requirements you must meet to stay within the lease. The numbers are in the lease, not in this guide.
- The landlord's protection comes from written add-ons to your policy, not from the certificate. Send both.
- The landlord's own policy usually does not insure your stock, racking or equipment. Those belong on your property coverage.
What does a warehouse lease ask for, and what do I send back?
Warehouse leases commonly ask for liability limits, the landlord named on your policy, property cover on what you keep inside, and proof before you move in. Find each line below in your own lease, then send what the last column says.
There is no standard warehouse lease. We found no neutral model lease, so this table follows the wording in two industrial leases filed with federal regulators, which show what a lease can ask for. (Source: industrial lease, 2006) (Source: industrial lease, 2014) Your lease may ask for more, less or something different.
| The lease says | It means | What to send back |
|---|---|---|
| Liability of a set amount per incident and per year | Your liability policy shows both numbers or higher | Certificate showing both limits |
| Landlord, and often its lender and manager, named on your policy | Each party is added to your liability policy by name | Copy of the written add-on, not only the certificate |
| Insurer gives up the right to recover from the landlord | Your insurer cannot sue the landlord after paying you | Copy of that add-on; ask your attorney about mutual versions |
| Your policy pays first | The landlord's insurance is not asked to share a claim | The add-on wording that says so |
| Property cover at full replacement cost | Your stock, racking and improvements are insured for the cost to replace them | Certificate showing the property limit |
| Lost-income cover for a stated period | Rent and bills continue to be paid after a covered loss | Certificate showing the coverage and its period |
| Extra liability layer for a higher total | An umbrella can count toward the limit | Certificate listing the umbrella and what it sits on |
| Notice to the landlord if the policy is cancelled | Your insurer warns the landlord a set number of days ahead | Ask your agent first whether your insurer will agree |
| Insurer of a minimum financial rating | Your insurer must hold that rating | Your insurer's name and rating, from your agent |
| Cover if you handle hazardous materials | Ordinary liability may not respond to a spill | Ask your agent what your policy says about it |
Wording follows the two filed leases named above. Your own lease governs.
What do the insurance words in my lease actually mean?
Three phrases do most of the work: naming the landlord on your policy, giving up your insurer's right to recover from the landlord, and the two limit numbers. The first two are written changes your insurer issues. A certificate cannot create them.
- Naming the landlord on your policy. 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 → is a party added to your liability policy so it is defended and paid if a claim comes from your operations. One filed lease names the landlord, its lender and its property manager; the other names the landlord.
- Giving up the right to recover. 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 → stops your insurer from going after the landlord for money it paid you. One filed lease has each side give this up for property damage whatever the cause. Whether that suits you is a question for your attorney.
- The two numbers. "$2,000,000 and $5,000,000" means the most the policy pays for one incident and the most it pays for the 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 →. One filed lease asks for $2 million and $5 million; the other asks for $2 million and $3 million.
A third piece is the notice of cancellation: a set number of days' warning to the landlord before your policy ends. Both filed leases ask for 30 days. (Source: industrial lease, 2006) (Source: industrial lease, 2014) Your insurer may or may not agree to give it, so ask before you sign.
A certificate of insuranceCertificate of Insurance (COI) A one-page proof of your coverage, showing the insurer, policy number, and limits, that you hand to a landlord or client. Insurers call it a certificate of insurance. more → is the one-page proof of coverage that you hand over. It summarizes what you bought. Your policy wording decides what is covered. Our guide to what a certificate is shows each box on the form.
Does my landlord's insurance cover my stock and racking?
Usually not. A landlord insures the building and its own liability. Your goods, racking, forklifts and lost income need your own policies, and the lease may spell out which side insures what you built inside.
Both filed leases ask the tenant for property cover on its own improvements, and one adds trade fixtures and alterations, at full replacement cost. (Source: industrial lease, 2006) (Source: industrial lease, 2014) The landlord's own policy is for the building, so for a wholesaler the stock and racking are yours to insure. Your property coverage is built to insure goods, racking and equipment, so the limit has to match the fullest your warehouse gets, not an average month.
Settle who insures improvements you pay for, such as a mezzanine, dock levelers or a cold room. Policies differ on whether they count as part of the building or as your contents, so write the answer into the lease. A filed lease asks for these at full replacement cost, and also asks for lost-income coverage for 12 months. That is what business interruption coverage is for. Rent can continue while a fire keeps you out of the building. Your general liability coverage answers claims from a driver or visitor hurt on your dock.
If your goods sit in a third-party warehouse instead, the storage agreement, not a lease, sets who insures them. Our guide to goods held in a third-party warehouse covers that case. Where your lease covers a sprinkler or alarm system, your property insurer may ask you to keep it working. Ask your agent to show you where that condition is written.
What can I ask to change before I sign?
The limits, the notice period and who insures the improvements are often worth raising. The insurance section is easier to change before signing than after, so send it to your agent first.
- The limit. If the number is high, ask whether your liability limit plus an umbrella policy can meet it. That may cost less than raising the base limit. Our guide to when you need an umbrella explains how it works.
- The notice period. Ask your insurer what notice it will give before you agree to a number. A lease that asks for notice your insurer will not give may leave you in breach from the start. Ask your attorney.
- Raises during the term. One filed lease lets the landlord raise the required limits no more than once in three years. (Source: industrial lease, 2014) Read yours for a clause like it.
- Mutual waivers. A lease that has both sides give up the right to recover may change what you can claim after a fire. Your attorney should read it.
The state rules under a lease, such as workers' comp, are in our guide to insurance requirements by state. Buyers can ask for similar things in their own agreements; see insurance in a vendor agreement.
What should I send the landlord before I move in?
Send a certificate, copies of the add-ons that name the landlord and give up the right to recover, and your insurer's rating if the lease asks. Do not send the whole policy.
Both filed leases ask for proof before the tenant takes the space, and one also asks for a new certificate on renewal and again shortly before each policy expires. (Source: industrial lease, 2014) Our guide to what a landlord can require covers any business. Put the date you need the certificate by into your request to your agent, so the paperwork is ready before the keys are.
- Send your agent the lease's insurance section and its exhibit.
- Ask for a certificate that shows each limit the lease names.
- Ask for copies of the written add-ons, with the landlord's and lender's names spelled as the lease spells them.
- Send all three to the landlord. Repeat at each renewal and each change of insurer.
Frequently asked questions about warehouse lease insurance
The new insurer has to issue its own add-ons naming the landlord, and you send a new certificate. The old add-ons end with the old policy, so ask for the new ones to start the day the old policy ends.
You can sign, but leases usually ask for proof before you take the space. Send your agent the insurance section first, so the policy is built to match it.
Each lease asks for its own proof and may name different parties. Send each landlord a certificate and add-ons that match that lease.
Have your lease's insurance section checked against your policy
Include the insurance section and exhibit from your lease with your quote request, so the coverage is built to match what the landlord asks for.