Lessor’s risk only (LRO) insurance

Lessor's risk only (LRO) insurance is designed for commercial landlords who lease space to tenants. Also known as landlord insurance, it helps protect commercial building owners from the risks associated with owning and renting commercial property.

An LRO policy typically combines property and liability protection. It can help cover damage to the insured building from covered events, along with lawsuits involving injuries or property damage suffered by tenants, their customers, or other visitors. This coverage can be valuable for landlords who own office buildings, retail store centers, warehouses, and other commercial properties.

Lessor’s risk covers commercial property landlords against certain risks and lawsuits from their tenants or visitors. For example, if a fire caused by a tenant’s restaurant damages your building, an LRO policy can help cover the resulting property damage, subject to the policy’s terms and limits.

LRO can also provide coverage for claims involving:

• Slip-and-fall accidents resulting in a bodily injury
• Weather-related damage, such as wind, hail, snow, or ice
• Theft and vandalism
• Fire and smoke damage
• Certain water damage claims, such as burst pipes or backups
• Data loss when tenants use the landlord’s network or Wi-Fi

General liability insurance covers common business risks such as customer injuries, damage to a customer’s property, and advertising injury. Lessor’s risk insurance includes general liability along with commercial property insurance for the commercial building, making it similar in some ways to a business owner’s policy (BOP).

Commercial landlords may require tenants to carry their own general liability insurance to cover risks associated with the tenant’s business operations, and include the landlord as an additional insured.

Any commercial property owner should consider LRO coverage. This is especially true for small business owners, as even one lawsuit could have a significant impact on your bottom line. Lenders typically require this insurance coverage for any loans involving commercial real estate.

The types of properties covered by lessor’s risk include habitational and apartment buildings, shopping centers, office space, and warehouses. However, if a property has both residential and commercial spaces, you may need mixed-use building property insurance since dual-occupancy can add unique risks.

A lessor’s risk insurance policy is intended for landlords who occupy less than 25% of leasable space within a building, so it wouldn't apply to a duplex or a two-flat dwelling where the landlord occupies half the building.

LRO generally doesn't cover a tenant’s business property, such as office equipment, furniture, computers, and supplies. Tenants may need business renter’s insurance to protect their own property from covered events such as fire, theft, and vandalism.

Lessor's risk coverage also doesn't cover every type of property damage or liability risk. Property coverage depends on the policy’s terms, limits, and exclusions, so landlords should review their policy to understand which risks are covered.

It does. Most people who purchase lessor’s risk only insurance can also add building insurance coverage to their LRO policy, similar to a BOP. Building coverage can help pay to repair or replace the insured property after a covered event and may also help replace rental income while the property is being repaired.

In deciding whether to offer you coverage, and how much your premium should be, your insurance company will take a variety of factors into account. These include:

• Building age, condition, and any renovations
• Location
• Any existing hazards
• Occupancy and vacancy rate
• Security and fire systems, such as video cameras, burglar alarm, smoke detectors, fire extinguishers, and sprinklers

An insurance company will also consider the type of building, as retail complexes are likely to see more foot traffic and face more risks, than an office space.

While LRO insurance can cover many risks associated with owning and leasing commercial property, commercial landlords and building owners may need additional policies or endorsements to address other risks. These may include:

Commercial auto insurance: This policy covers vehicles owned by your business. It typically pays for accidents and damages related to theft, weather, and vandalism.

Commercial umbrella insurance: Umbrella insurance provides additional coverage for liability claims made on general liability, commercial auto, or employer’s liability insurance, once a policy's limit is reached.

Cyber insurance: Also called cybersecurity insurance, this policy can cover fraud monitoring services and other costs related to a data breach or software attack.

Errors and omissions insurance: Also called professional liability insurance or E&O, this policy can help cover legal fees and lawsuits related to mistakes, negligence, or the quality of professional services.

Workers’ compensation insurance: Workers' comp is required in almost every state for real estate businesses that have employees. It can cover medical expenses for work injuries.

Surety bonds: Real estate professionals sometimes need a surety bond to get licensed in their state. It acts as a financial guarantee they'll comply with contract terms and regulations.

Flood insurance: Flood coverage is a specialty insurance policy that can help protect commercial buildings and their contents from flood damage, which may not be covered by standard property insurance.

Per-location aggregate endorsement: This general liability add-on gives each of your properties its own separate aggregate limit, rather than sharing one limit across all of them. It can help prevent a pricey claim at one property from reducing the coverage available at the others.

Are you ready to safeguard your real estate, property owner, or commercial landlord business with lessor's risk only insurance?

Simply complete Insureon’s easy online application today. We partner with top-rated U.S. insurance companies to get you the best business insurance. You can also consult with an insurance agent on the types of business insurance you need, and how to get affordable coverage within your budget.

Once you find a policy that fits your needs, you can begin coverage and access your certificate of insurance (COI) in less than 24 hours.