Understanding Business Improvements & Betterments

Apr 25, 2017

Are you planning to spruce up your business space this spring?

Renovating your office can breathe new life into your space & operations. Studies show that revamping your business space can result in increased worker productivity, employee morale, and better brand awareness which all drive your bottom line.

But before you pick up that hammer or schedule your contractor, make sure you understand how these improvements will be insured, who will own them, and if they’re allowed at all.

Before You Begin

If you rent the property in which you operate your business, be sure to check the terms of your lease before you begin your project.

Find out what improvements are permitted and what’s not allowed before you move forward.

Also make sure you understand what your updates will be classified as—are they improvements and betterments, or trade fixtures?

Are you simply putting up a fresh coat of paint, or are you installing wall-to-wall fixed cabinets to match the new flooring you’ve picked out? Are you moving in a piece of equipment that’s vital to your operations? Will any items be moving with you, or will they become a permanent piece of the rental property?

The type of item(s) coming into your space is very important, both to insuring it and understanding ownership of the finished product.

Types of Updates

Improvements & Betterments are defined as anything that a tenant attaches to the landlord’s real estate that will become a permanent part of that real estate. These items become property of the landlord and cannot be removed at the end of the lease.
Examples of improvements and betterments are: cabinets, counters, partitions, new flooring or ceilings, appliances, and built-in shelves or bookcases.

These types of items may fall under your landlord’s business policy– but there are exceptions.

Trade fixtures are removable personal property that a tenant attaches to leased land for business purposes, such as a display counter, but which can be easily removed when the lease ends without damaging the landlord’s property. These items should fall under your Business Renters Insurance Policy.

Who’s Responsible for Insuring Updates?

Where does the responsibility of insurance improvements fall? Do they fall under your business renters insurance policy or to your landlord’s coverage?

The best answer— it depends.

Your lease agreement with your landlord should clearly state how insuring and ownership of any improvements and updates will work.

Improvements & Betterments traditionally fall under the landlord’s business insurance policy, but always make sure to check with your landlord to ensure coverage applies. Depending on the lease agreement in-place, you may be responsible for insuring any improvements you make to the property.

Ownership & Responsibility

Likewise, ownership and responsibility of improvements traditionally falls to the landlord upon installation.

So, once you’ve installed those beautiful new cabinets, they become the property & responsibility of your landlord—though there are exceptions. Once improvements become your landlord’s property, their business insurance policy should provide coverage.

Give Your Landlord Notice

Before you begin your project, be sure you provide your landlord plenty of notice about your planned improvements.

Your landlord may need time to increase the coverage limits on their business policy to properly insure the improvements you plan to make.

Along with this notice, be sure to include a detailed description and value assessment of any planned improvements. Without this information, your landlord’s insurance policy could fall short of coverage.

Your Insurable Interest

Though your improvements become property of your landlord, this doesn’t mean you sign away all rights. You still have insurable interest in the investment you’ve made to your rental property for the duration of your lease.

That means, if a claim does occur during your lease, you may be entitled to payment of lost use— dependent upon the terms of your lease agreement.

Speak with an Expert

When it comes to business insurance, the guidelines for Improvements and Betterments can be incredibly nuanced. Be sure you get in touch with an insurance agent who will go over your options in detail.

Have questions about where your coverage may lie? Contact our team of experts today and go over your coverage options.


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