One of the “nets” of the triple net lease is insurance. Tenants are expected to pay for insurance out of pocket – rather than have the lender cover that insurance themselves. Covering the costs of insurance is one of the reasons triple net leases are desirable to investors.
But it’s not enough to simply have insurance – it has to be good insurance, covering everything that could happen to the property. This is especially true when you have a single tenant, because if that tenant is unable to pay their rent due to damage costs the fallout can be substantial.
What Are Triple Net Lease Insurance Requirements?
Many insurance choices are up to the lessee and the landlord, so it’s a smart idea to require as much insurance as is reasonable on the property. Insurance includes:
- Property and Casualty Insurance – This is insurance that covers any unexpected property damage, such as those from fire or theft. Most of the property is covered by this type of insurance.
- Commercial General Liability Insurance – This is insurance that covers lawsuits due to injuries or damages that occur on the property. Despite the tenant being in charge of maintenance and fees, a landlord could be responsible for a lawsuit that occurs on the property if this insurance isn’t purchased.
- Specialty Insurance – You’ll also want to insure anything not protected by the property and casualty insurance. This may need be purchased separately. HVAC and flood insurance are two types of insurance that other insurance doesn’t usually cover.
Triple net lease insurance reqs can be set by the landlord and the tenant, but as much insurance as you can afford can be very valuable. Keep in mind that some experts recommend taking out your own insurance policies on some aspects of your property so that you have added protection that isn’t in the hands of the tenant.
If you’re looking for a loan for your triple net property, sign up with CRE Lender today. We’re the number one lending connection experts putting lenders and borrowers together for low interest loans perfect for your financial needs. Sign up with CRE lender today to find out more.
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