Insurance Requirements in Commercial Leases: What Property Managers Should Require (+ Template Language)

A commercial lease's insurance section does one job: it decides whose insurance pays when something goes wrong at the property. Written well, a tenant's kitchen fire or a customer's slip-and-fall lands on the tenant's policy. Written vaguely — or written well but never verified — it lands on the owner's.

Most insurance sections are copied from the last lease, which was copied from the one before it. This page covers what the requirements should actually say, why each piece matters, and the part most leases skip entirely: how compliance gets verified after signing.

What commercial leases typically require tenants to carry

Scale to use type: a law office and a restaurant should not have the same insurance section. Cooking, alcohol service, heavy foot traffic, and hazardous inventory all justify higher limits or added coverages (liquor liability being the obvious one).

The clauses that actually protect the owner

Limits get the attention, but four provisions do most of the protective work:

Additional insured status. The landlord entity and the management company should be additional insureds on the tenant's GL policy — by endorsement. Name the entities precisely: additional insured status for "Main Street Properties LLC" does nothing for "Main Street Holdings LLC." Where leases go wrong is accepting a certificate that mentions additional insured status in the description box without the endorsement behind it. The description box amends nothing.

Primary and noncontributory. Without this wording, the tenant's carrier can argue the owner's policy should share the loss — which is exactly the outcome the requirement exists to prevent.

Mutual waiver of subrogation. Standard in most commercial leases: each party's property insurer agrees not to chase the other party after paying a claim. The lease clause needs a matching endorsement on the policy, or the clause is a promise the insurance doesn't keep.

Notice of cancellation. ACORD certificates promise notice "in accordance with the policy provisions" — which often means no notice to you at all. Require the tenant (and ideally their insurer, by endorsement) to give 30 days' written notice of cancellation or material change. Mid-term lapses are how buildings end up with uninsured tenants for months without anyone knowing.

Sample clause structure

A starting skeleton to adapt with your attorney — jurisdictions and asset types vary too much for copy-paste lease language:

Tenant shall, at Tenant's expense, procure and maintain throughout the Term: (a) Commercial General Liability insurance with limits not less than $1,000,000 per occurrence and $2,000,000 general aggregate, naming Landlord and Landlord's property manager as additional insureds by endorsement; (b) "Special Form" property insurance covering Tenant's improvements, fixtures, and personal property at full replacement cost; (c) Workers' Compensation insurance as required by law; (d) Business interruption coverage of not less than twelve (12) months of gross income. All liability coverage shall be primary and noncontributory with respect to any insurance maintained by Landlord. Landlord and Tenant mutually waive rights of subrogation, and each shall cause its insurers to do the same. Tenant shall deliver certificates of insurance, with required endorsements attached, prior to occupancy and not later than ten (10) days before each policy renewal, and shall provide thirty (30) days' written notice of cancellation or material change.

Note the last sentence. Requiring delivery of the certificate with endorsements attached, before occupancy and at every renewal is what makes the rest of the section enforceable in practice. A right you never exercise might as well not exist.

The gap between the lease and reality

Here's the pattern across most portfolios: the lease requirements are fine, and compliance quietly decays anyway. The tenant's broker sends a certificate at signing, someone files it, and three renewals later the policy has a different carrier, lower limits, and no additional insured endorsement — while the file still says "insurance: received."

The lease is a set of requirements. Compliance is an ongoing verification against those requirements — at move-in, at every policy renewal, and at every lease amendment. That means someone has to extract the requirements from the lease into a checkable format, read each incoming certificate and its endorsements against them, and chase the tenant's broker until gaps are corrected. (This verification loop is the job Tightrope's agent Travis automates — reading each COI against the actual lease requirements and following up with the tenant or their broker until a compliant certificate is on file.)

For the operational side — running this across a whole portfolio — see our guide to COI tracking for property managers.

FAQ

What insurance is a commercial tenant required to have? Whatever the lease requires — typically $1M/$2M general liability with the landlord as additional insured, property coverage on the tenant's improvements and contents, workers' comp, and business interruption coverage. There's no statutory minimum for most coverage; the lease is the requirement.

Should the landlord or the property manager be the additional insured? Both, usually — the owner entity as named in the lease, plus the management company. Precision matters more than breadth: the entity names on the endorsement must match the entities in the lease.

What's the difference between a certificate holder and an additional insured? A certificate holder just receives the certificate — no coverage rights. An additional insured is actually covered under the policy. Owners want to be both, and the additional insured part requires an endorsement.

Can a landlord require tenant insurance mid-lease? Generally only at renewal or amendment, unless the lease reserves the right. Which is a good argument for writing the requirement — and the verification rights — in from the start.

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Want to know whether your tenants' certificates actually match their leases? Run one through Travis on Tightrope's free plan and see what it catches.