| A business with an exceptional
lease into its tenth year of a 20-year term is in a
favorable yet vulnerable position. Finding a comparable
property at a reasonable rate would be almost impossible.
How can a lessee with a valuable lease protect against
the building's destruction and the termination of its
lease? Tenants caught in such a situation often regret
that they didn't know about Leasehold insurance.
This form of insurance protects a tenant's interest
in a lease that's canceled when a covered cause of loss,
such as fire, damages the described premises. Leases
commonly have a cancellation provision that protects
the tenant from having to continue lease payments when
the leased property is untenantable.
Leasehold insurance can also cover improvements and
betterments that the tenant has made to the leased property.
Particularly with long-term leases, a tenant is likely
to alter the premises to fit the needs of the business.
This might include special lighting, cables for computers,
counters, refrigeration equipment, or other changes
that might belong to the landlord when the lease ends.
Leasehold insurance protects the time value of the tenant's
use of improvements and betterments.
An insured doesn't receive the same compensation from
Leasehold insurance toward the end of a lease as they
would at the start of the lease, because the amount
of loss declines as the term of the lease progresses.
Recovery after a loss comes to the amount it would take
per month to rent similar quarters, times the number
of months remaining on the lease. Tenants: Get your
lease out and contact
us.
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