Tenant Improvements & Betterments Coverage
Also known as Tenant improvements (TI), betterments, leasehold improvements
You paid to build out your space. Your landlord’s policy insures the shell, not your investment in it.
Tenant improvements and betterments coverage protects the permanent build-out you paid for in a space you lease: the walls, flooring, lighting, built-in fixtures, HVAC modifications, and finishes that became part of the building the day they were installed. Here is the trap most tenants miss. Your landlord’s property policy insures the base building, not the improvements you added, and your ordinary business personal property coverage is built for the movable things you can take with you. The improvements sit in between, and if a fire or water loss destroys them, this is the coverage that pays to rebuild what you put in. It usually lives as a line within a commercial property policy or a business owners policy.
Reviewed for accuracy by Mark Hutchings, Licensed Insurance Producer (NV #3600994, CA #6003400).
Who needs Tenant Improvements & Betterments Coverage?
- Restaurants and bars that built out a kitchen, bar, or dining room in a leased space
- Retailers and showrooms that paid for a custom fit-out, millwork, lighting, or fixtures
- Medical, dental, and veterinary practices with specialized rooms, plumbing, and finishes
- Salons, gyms, and studios that installed permanent equipment, partitions, and flooring
- Offices and professional firms that added partitions, cabinetry, wiring, or upgraded finishes to a lease
What it covers
- The cost to repair or replace permanent improvements you made or paid for, after a covered loss like fire, water, or vandalism
- Build-out elements that are attached to the building and cannot simply be unplugged and carried out, such as walls, flooring, lighting, and built-in fixtures
- Improvements you inherited or paid a prior tenant for, when your lease makes you responsible for insuring them
- The improvements portion of a loss even though the landlord owns the building itself
- Coverage coordinated with the rest of your property program, typically written into a commercial property policy or business owners policy
What it doesn’t cover
- The landlord’s base building and structure, which belong on the landlord’s own property policy
- Your movable business personal property such as inventory, furniture, and equipment, which is covered by business personal property insurance
- Trade fixtures and equipment you can remove at the end of the lease, which are usually treated as personal property rather than improvements
- Ordinary wear and tear, maintenance, and gradual deterioration
- Flood and earthquake damage, which require separate coverage
Real claim scenarios
The kitchen that burned
A Reno restaurant leased a bare shell and spent heavily on a commercial kitchen, hood system, bar, and dining-room finishes. A grease fire guts the space. The landlord’s policy rebuilds the structure, but the tenant improvements coverage is what pays to rebuild the kitchen and interior the tenant paid for.
The flood upstairs
A pipe bursts in the unit above a leased retail store, and water ruins the new flooring, custom shelving, and lighting the tenant installed. Tenant improvements coverage responds to the cost of replacing those permanent improvements.
The break-in and the vandalized fit-out
Vandals damage the built-in millwork, partitions, and fixtures of a leased salon overnight. Because these are attached improvements the tenant paid for, the tenant improvements portion of the property policy covers the repairs.
Scenarios are illustrative; actual coverage depends on your policy terms.
How it’s priced
Tenant improvements coverage is priced around the replacement cost of what you built and the risk profile of the building it sits in. Carriers look at the value of your improvements, the construction and occupancy of the building, the location, and the limit and deductible you choose. Because it is usually part of a broader property policy, it is rated alongside your other property coverage rather than as a standalone premium.
- The full replacement cost of the improvements and betterments you paid for
- The construction type, age, and protection of the building
- Your occupancy and the nature of your operations
- Your location and its exposure to fire, water, and weather losses
- The coverage limit, deductible, and valuation basis you select
- Protective safeguards such as sprinklers and alarms
What to watch out for
- Read your lease first: many commercial leases make the tenant responsible for insuring the improvements, and sometimes even portions of the building, so your coverage should match what you agreed to. When in doubt, send us a copy of your lease and we’ll review it.
- Insure to the full replacement cost of your build-out, because under-insuring is the most common and most painful mistake here
- Coordinate with the landlord’s policy so the base building and your improvements are each covered once, with no gap in between
- Understand how your policy defines improvements and betterments versus removable trade fixtures, since the two are treated differently
- Confirm whether valuation is replacement cost or actual cash value, because actual cash value deducts depreciation from an older build-out
Tenant Improvements & Betterments Coverage FAQs
Related coverages
We tailor Tenant Improvements & Betterments Coverage for: Food & Beverage, Commercial Real Estate.
Get Tenant Improvements & Betterments Coverage coverage that fits
We’ll match your limits and endorsements to what your contracts actually require — across Nevada & California.