Reviewed by Tom Moore, Agency Partner, CA Agency Insurance License 6003355
Last reviewed: 8/07/2026
Key takeaway: Commercial property insurance for building owners who lease to tenants, sometimes called lessor's risk coverage, protects the physical structure, your rental income stream, and your liability as the property owner. It is not the same as the insurance your tenant carries, and it should not be built like a standard owner-occupied commercial policy. Spokane building owners need to pay particular attention to loss of rents coverage, ordinance or law endorsements (especially for older buildings), and vacancy clause limitations that can reduce or void coverage between tenants.
You bought a building. You found a tenant. You signed a lease. And somewhere in that process, you probably talked to an insurance agent or got a certificate of insurance from your tenant and figured the coverage question was handled.
It often isn't.
Owning a commercial building you lease to someone else creates a specific set of risks that a standard commercial property policy doesn't always address cleanly. The building is yours. The business inside it is theirs. The liability exposure at 2 a.m. when a pipe bursts? Yours. The lost rent while the building is unoccupiable after a fire? Also yours, unless you bought the right coverage.
Here's what Spokane building owners actually need in place, and where the gaps tend to show up.
Outline
You Own the Building. Your Tenant Runs a Business in It. Who Insures What?
What Your Commercial Property Policy Covers as the Building Owner
As the building owner, your commercial property policy is designed to cover the physical structure, walls, roof, foundation, permanently installed fixtures, shared mechanical systems. If a covered event damages the building, your carrier pays to repair or rebuild it, up to the policy limit.
What it does not cover: your tenant's equipment, inventory, furniture, leasehold improvements they installed, or their business income. Those are the tenant's problem and should be addressed by the tenant's own commercial property policy. A landlord's policy covers the building structure, but it does not cover the tenant's business personal property, equipment, inventory, furniture, fixtures, and improvements.
This division sounds clean. In practice, the line between "building" and "tenant improvement" gets blurry, especially when a tenant has modified the space. Get the lease language right on who owns what, and make sure your policy reflects it.
What Your Tenant Is Responsible For
Your tenant should carry their own commercial property policy covering their business personal property and general liability insurance naming you as an additional insured. Most commercial leases require tenants to insure their business personal property, tenant improvements, and sometimes carry coverage for the building itself or their portion of it.
The "additional insured" piece matters more than people realize. If a customer slips and falls inside your tenant's space and sues everyone in sight — including you as the property owner — your tenant's general liability policy should respond on your behalf. Without the additional insured endorsement, you're relying entirely on your own policy to defend a claim that originated on premises your tenant controlled.
Require the certificate of insurance before the tenant takes occupancy. Require it at every renewal. And make sure the policy limits are actually adequate for the type of business your tenant runs.
The Coverage Gaps That Catch Spokane Building Owners Off Guard
Loss of Rents: If a Covered Loss Pushes Your Tenant Out
This is the one that stings most. A fire damages the building. Repairs take four months. Your tenant can't operate and stops paying rent. Your mortgage doesn't care — it's still due on the first.
Loss of rents coverage (sometimes called rental value coverage or fair rental value) pays you the income you would have collected from your tenant during the repair period after a covered loss. This protection replaces lost rent while your property is being repaired after a covered loss.
It's not always included automatically. And when it is, the policy limit matters — a 12-month cap on a building that takes 18 months to repair leaves a gap. Review what your policy actually pays and for how long. If your building generates $8,000 a month in rent, a four-month repair equals $32,000 in lost income. That number should be in your coverage conversation, not discovered after a claim.
Ordinance or Law Coverage: Older Spokane Buildings and Code Upgrades
Spokane has no shortage of older commercial buildings, brick construction, pre-1980 electrical, HVAC systems that haven't been touched in 30 years. If one of them suffers significant damage and needs to be rebuilt, current building codes apply to the reconstruction.
Standard commercial property policies pay to rebuild to the same spec as before. They do not pay for the cost difference between the old spec and what current code requires. Ordinance and law insurance covers additional costs associated with repairing or rebuilding a structure to meet current building codes and local ordinances after a covered loss, while standard commercial property coverage pays to replace property damage with similar materials.
That gap can be substantial. Electrical upgrades, sprinkler system requirements, accessibility compliance — these are real costs that come out of your pocket if you don't carry an ordinance or law endorsement. For any Spokane building built before 1990, this is not an optional add-on. It should be in every policy.
Vacancy Clauses: What Happens Between Tenants
Here's one almost nobody reads until it's too late. Most commercial property policies contain a vacancy clause that restricts or limits coverage if the building is unoccupied for a consecutive period — typically 60 days. Standard policies contain a vacancy clause that can severely restrict or even void coverage if the building sits vacant.
Between tenants, during a renovation, during a slow leasing market — these gaps happen. If a vandal breaks in, a pipe freezes, or a fire starts while the building is sitting empty past that threshold, your carrier may deny or reduce the claim.
If your building is between tenants, tell your broker immediately. There are endorsements and standalone vacant building policies that address this. Waiting until after the loss to find out the vacancy clause applied is not a conversation you want to have.
Liability Is More Complicated Than It Looks
When someone is injured on your commercial property, figuring out who's responsible isn't always fast or clean. Tenants are typically responsible for their own leased premises — but shared spaces, parking lots, exterior access points, and building systems are usually the landlord's territory.
Tenants are typically responsible for their own premises, but landlords maintain responsibility for shared spaces and injured parties often sue both landlord and tenant.
Your commercial property policy should include general liability coverage as a building owner. The limits matter. A slip-and-fall claim in a shared corridor, a injury caused by a building defect, a tenant's visitor injured by a condition you were responsible to maintain, these scenarios go back to you. A $1 million general liability limit is a common starting point, but if you own a multi-tenant building with significant foot traffic, that number deserves a real conversation.
One more thing: if your building has common areas, make sure your policy explicitly covers them. Some policies are narrower on this than you'd expect.
What Your Lender Is Probably Requiring (And Why It Matters)
If you carry a commercial mortgage on the building, your lender almost certainly has insurance requirements written into the loan documents. Commercial mortgages in Washington require property insurance covering at least the loan amount, with lenders named as loss payees to protect their interest in the property.
The lender is named as a loss payee on your policy, which means the insurance check goes to them first if the building is destroyed. This is standard and expected — but the limits they require and the limits you actually need to rebuild the building should match. If construction costs have risen significantly since the policy was written (and in the Spokane market, they have), the insured value and the actual replacement cost may no longer be the same number.
Get a replacement cost estimate updated regularly. Underinsuring to save on premium is fine until it isn't and a coinsurance clause in your policy can reduce your claim payout significantly if the insured value is too low relative to actual replacement cost. The Washington State Office of the Insurance Commissioner is the regulatory authority overseeing carrier practices in Washington if you ever have a claims dispute.
How to Structure the Coverage Correctly
There's no single off-the-shelf policy that handles every building owner situation. A single-tenant retail strip on the South Hill is a different animal than a multi-tenant office building downtown or a mixed-use property near the University District. The structure of your lease, the age of your building, your mortgage requirements, and your tenant mix all affect what you need.
The core coverage package for a Spokane commercial building owner who leases to tenants should include:
- Building coverage at current replacement cost — not ACV (actual cash value)
- Loss of rents coverage with a limit that reflects your actual monthly income and a repair timeline that's realistic for your building type
- Ordinance or law endorsement — especially for any building built before 1990
- General liability as building owner, covering shared spaces and exterior areas
- Vacancy coverage provisions or a separate endorsement if there's any realistic chance the building will sit empty
Equipment breakdown coverage is worth adding if you own the HVAC, elevators, or other major building systems that your tenants depend on. A mechanical failure that makes a space untenantable has the same income consequence as a fire.
Should You Require Tenants to Name You as Additional Insured?
Yes. Every time. Landlords may require that their tenants include the landlord as an additional insured party on the tenant's policy to reduce the landlord's potential liability.
An additional insured endorsement on your tenant's general liability policy means their carrier has to defend you if a claim arises from their operations. Without it, a claim stemming from your tenant's negligence or their customer's actions inside the leased space routes entirely to your own policy — and your own limits.
Require it in the lease. Verify it on the certificate of insurance. Check it at renewal.
You've already made the investment in the building. Make sure the insurance is structured to protect it — not just check a compliance box for your lender or leave you exposed when the space is between tenants.
We work with Spokane commercial property owners to review what's in place and identify what's missing before a loss makes it obvious. One conversation, no pressure. Call us at (509) 327-1658 or get a quote at All Lines Insurance.
Frequently Asked Questions: Commercial Property Insurance for Building Owners in Spokane
What is commercial property insurance for building owners who lease to tenants?
It's coverage designed for the person who owns the physical building and collects rent, not the business operating inside it. It typically includes the building structure, general liability as the property owner, loss of rents after a covered loss, and — when properly structured — endorsements for ordinance or law compliance and vacancy periods.
Does Washington state require commercial property insurance for building owners?
No state law mandates it. But if you carry a commercial mortgage, your lender requires it as a loan condition. And operating without it as a building owner creates enormous financial exposure — a total loss on an uninsured building is a full out-of-pocket rebuild.
What is loss of rents coverage and why does it matter?
Loss of rents (or rental income coverage) pays you the rent you would have collected while your building is being repaired after a covered loss. If your tenant has to vacate during repairs and stops paying rent, this coverage fills that income gap — up to the policy limit and time period specified.
Do I need ordinance or law coverage for my Spokane commercial building?
If your building was built before 1990, almost certainly yes. Standard property policies pay to rebuild to the same spec as before the loss. They don't cover the added cost of bringing the structure up to current building codes. In Spokane, that gap can be significant — especially for older brick commercial buildings.
What happens to my coverage when the building is between tenants?
Most policies include a vacancy clause that restricts or reduces coverage after the building has been unoccupied for a set period — typically 60 consecutive days. If your building sits empty, notify your broker immediately so coverage can be adjusted before that window closes.
Should I require my tenant to name me as an additional insured on their policy?
Yes, and it should be written into the lease. An additional insured endorsement on your tenant's general liability policy means their carrier defends you if a claim arises from their operations or their customers on the premises. Without it, those claims route directly to your own policy.
What's the difference between my commercial property policy and my tenant's policy?
Your policy covers the building itself. Your tenant's policy covers everything inside it that belongs to them — equipment, inventory, furniture, leasehold improvements, and their own business income. Neither policy automatically covers what belongs to the other party.
How do I know if my commercial building is insured to the right value?
The insured value on your policy should reflect current replacement cost — what it would actually cost to rebuild the building today, at current labor and material costs. If your policy was written several years ago and hasn't been updated, there's a good chance the insured value lags behind actual replacement cost. Ask for a replacement cost estimate update at your next renewal.
