For people living in or using a building, natural disasters or fires or burglaries are all real concerns. To protect against such risks, owners of commercial or residential buildings buy building insurance. So who can purchase building insurance?
Owners of commercial or residential buildings may fully or partially use these structures themselves or rent them out. For such owners, building insurance helps protect against the financial loss that might result from damage to the building from fire, earthquakes, lightning, etc.
Similarly, building insurance also covers losses arising from theft, provided the contents belong to the landlord and not the tenant. The owner of a commercial building does not have to buy cover for the contents of individual offices/shops. The occupants of the building can buy it separately to cover their own individual risks. Building insurance is meant for the superstructure and associated infrastructure only.
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Case study: Owners and not tenants responsible for building insurance
Mr. Gautam owns a commercial building. He rented out two of its office spaces and retained some space for himself. Owing to the risk of fire and earthquakes, he considered buying insurance coverage for the building.
He approached the tenants and asked them to purchase insurance coverage for the whole building. Specifically, he wanted the tenants to contribute to the premium based on the space occupied by each one. However, the tenants already had individual insurance for their offices and rejected Mr. Gautam’s offer. Instead, they pointed out that Mr. Gautam was responsible for the insurance of the whole building since he was the owner. And they noted that they were responsible only for the contents of their own office spaces.
Mr. Gautam’s insurance advisor reiterated this advice. He explained that if the building suffered damage, Mr. Gautam would have to repair it. So, Mr. Gautam needed the security net that building insurance offered.