Who Has the Insurable Interest?

The party responsible for maintaining or repairing a building is not always the party whose policy should respond to damage. It is important to understand contractual obligations before a claim occurs.

Insurable interest generally means that a person or business would suffer a financial loss if property were damaged or destroyed. However, having an insurable interest does not automatically determine which policy responds to or creates coverage. The policy wording, lease language, property descriptions, limits, deductibles, and other insurance provisions must all be reviewed together.

When a client leases commercial space, as an agent, you add value for your client by encouraging a review of the entire property arrangement—not just the policy limits.

Key Items to Consider:

• Obtain the complete lease and all amendments, including insurance requirements.
• Identify tenant-funded improvements.
• Encourage the client to maintain current photographs, invoices, plans, and construction records.
• Identify building systems the tenant must maintain or repair.
• Confirm that limits reflect current replacement cost—not the original construction cost.
• Review business income limits and the expected time required to rebuild.
• Confirm who is responsible for deductibles and claim expenses.
• Coordinate the tenant’s insurance requirements with the landlord’s insurance arrangements.
• Clarify who will coordinate repairs after a loss.
• Encourage clients to involve legal counsel when lease language is unclear.
• Revisit the discussion after renovations, expansions, or lease changes.