The cost of property and casualty insurance on the building that a landlord passes through to tenants as part of operating expenses, covering fire, liability, and other covered perils.
Landlords typically carry property insurance on the building shell and common areas and pass the premium cost to tenants on a pro-rata basis. Tenants are generally responsible for insuring their own personal property, business interruption, and tenant improvements. Lease abstracts should capture both the landlord's insurance pass-through obligations and the tenant's own insurance requirements — including minimum coverage amounts, carrier ratings, and additional insured requirements. Significant premium spikes (common after major weather events) can materially increase a tenant's occupancy costs unexpectedly.
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