Many building owners require the tenants to insure the improvements & betterments for the tenant’s insurable use of the property; however, there is a coverage problem that can develop for the building owner. Although the building owner may have the structure insured at 100% to value, they could possibly incur a coinsurance penalty at the time of loss as the tenant’s improvements and betterments may increase the total building value. For example, a $500,000 building with $200,000 improvements would be underinsured unless the total building value plus betterments are insured within the coinsurance limit.
Additional Property Not Covered
Another possible option to avoid the penalty would be to endorse the policy by adding Additional Property Not Covered which can be used to exclude the improvements & betterments property. The endorsement protects the building owner from a possible coinsurance penalty, yet does not give any coverage for the betterments. This avenue is taken by owners that do not want the additional premiums from insuring the building to the higher limits or the penalty involved in not increasing the building limits. The appropriate way to cover the structure would be for the owner to insure the total building including the betterments so as to not rely on the tenant to insure those improvements.
Communication between both parties is the key to insuring the property correctly. If you are a building owner or a tenant in a building and have questions about the building insurance, contact our Lake of the Ozarks insurance company at 573-348-2794.
Contact Insure the Lake today for all your Lake of the Ozarks insurance needs!
About the Author: Steve is a double back-flip insurance ninja. He was named Young Insurance Agent of the Year by the Missouri Association of Insurance Agents in 2010 and is a Certified Insurance Counselor. When he is not helping customers, he enjoys community service, Latin dancing with his beautiful wife and going on adventures with his two awesome sons.
Steve Naught, CIC
3736 Osage Beach Parkway
Osage Beach, MO 65065
Next to Golden Coral