Insurance
What kind of insurance must the landlord have on a life lease complex?
General Liability Insurance: Before the trustee releases any money for developing the complex, the landlord must get general liability insurance for at least $2,000,000 per claim or occurrence. The landlord must have this type of insurance both during and after construction. The landlord must include the tenants who paid entrance fees as “additional insured” on the general liability insurance.
All Risk and Boiler/Machinery: Before the occupancy date of the complex and as long as the complex is operating, the landlord must have:
- all risk property insurance that provides replacement cost coverage for the complex. If the landlord has a mortgage to secure the tenants’ entrance fees, they must include the mortgagee in the all risk property insurance coverage. If the landlord doesn’t have a mortgage, they must show the tenants as “loss payee”. If the building was destroyed by fire or other insured peril, the insurer would pay the entrance fees to either the mortgagee or to the tenants, depending on who is named in the policy.
- comprehensive boiler and machinery insurance, providing replacement cost coverage.
During construction, the landlord must also have or make sure that the general contractor has:
- general liability insurance for the construction site for at least $2,000,000 per claim or occurrence;
- all risk builders’ property insurance for at least the total amount payable to the contractor under the contract;
- comprehensive boiler and machinery insurance, providing replacement cost coverage.
Tenants should consider having insurance for their personal belongings as well as personal liability coverage.
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