What Is Lessors Risk Insurance? Coverage & Benefits Explained

01/22/2026

Imagine this situation: you own a small commercial building that you lease to a restaurant. One evening, a customer slips on an icy walkway outside the building and suffers an injury. The tenant has their own business insurance, but the lawsuit names you, the property owner, because the incident occurred on your premises. At the same time, a burst pipe damages part of the building, forcing the tenant to close temporarily. Repairs are expensive, rent is paused, and legal fees are stacking up fast.

This is where lessor risk insurance plays a critical role. Created specifically for commercial property owners who lease their buildings to tenants, lessors risk insurance helps protect against property damage, liability claims, and certain income losses tied to tenant-occupied spaces.

And since choosing the right lessors risk insurance can be complex and impact financial security, First Connect Insurance – leveraging partnerships with top carriers – offers insights into policy essentials.

In this article, we’ll cover what lessors risk insurance is, how a lessors risk policy works, what it covers (and doesn’t), how it compares to other insurance policies, cost considerations, and much more.

Key takeaways

Lessors risk insurance protects commercial property owners from liability and property-related risks when leasing buildings to tenants.
Coverage can include property damage, premises liability, and loss of rental income, with clear exclusions to understand upfront.
Compared to general liability insurance, lessors risk coverage is tailored primarily for landlords, not operating businesses.
Strong risk management practices can reduce claims and help keep lessors risk insurance premiums more affordable.

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What is Lessors Risk Insurance?

A lessor’s risk policy is a type of commercial property insurance designed for property owners (lessors) who lease or rent buildings to tenants. It focuses on protecting the landlord’s interest in the building itself and, in some cases, loss of rental income.

By contrast, tenants are typically insured under a Business Owner’s Policy (BOP), Commercial Package Policy (CPP), or Commercial General Liability (CGL) policy, depending on what is being insured. These policies protect the tenant’s operations, liability, business personal property, and sometimes tenant improvements, but they do not insure the building itself, which remains the landlord’s responsibility under a lessor’s risk policy.

Also known as Lessor’s Risk Only (LRO) or Landlord’s Insurance, the policy helps:

Protect the physical structure of the building (in most cases).
Cover liability risks if someone is injured on the premises due to the owner’s negligence.
Manage risks that tenants’ insurance policies typically don’t cover for landlords.

Many property owners often ask, does lessors risk cover the building? In most standard policies, yes – the building itself is a key component of lessors risk coverage, although the extent depends on the policy form and endorsements selected.

Still unsure what is a lessors risk policy? Put simply, it’s insurance that helps safeguard the building owner against losses related to property damage, third-party liability claims, and certain income interruptions arising from leased premises.

Coverage Options and Exclusions

One of the most important steps in choosing the right lessors insurance is to understand exactly what is covered – and what is not. Lessors risk policies are flexible, but coverage can vary depending on the insurer and endorsements selected.

That said, most LRO insurance coverage includes the following components:

Property Coverage: This protects the building structure against covered perils such as fire, windstorms, vandalism, or certain types of water damage.
Premises Liability: It covers bodily injury or property damage claims arising from accidents on the property, such as slips, falls, or falling objects.
Loss of Rental Income: This insurance policy reimburses lost rent if the property can’t be occupied due to a covered loss.
Medical Payments: It helps pay for minor medical expenses if someone is injured on the premises, regardless of fault.

Now that you know what lessors risk insurance typically covers, it’s crucial to understand what it excludes – this helps reduce confusion and prevents unpleasant surprises during a claim.

Some common exclusions in a lessors risk policy may include:

Damage resulting from a tenant’s intentional or criminal acts, subject to specific policy terms and conditions
Wear and tear or poor maintenance
Floods and earthquakes (often require separate policies)
Damage to tenant-owned property
Business operations conducted by the tenant

The table below shows how different coverage options affect both protection and pricing, making it easier to tailor a lessors risk policy to your needs.

Coverage Type	What It Protects
Property Coverage	Building structure
Premises Liability	Injury/property claims
Loss of Rental Income	Missed rent after loss
Optional Endorsements	Added protections

Benefits of Lessors Risk Insurance

The benefits of lessors Risk Only insurance go beyond basic protection. When structured properly, it becomes a long-term risk management tool that helps property owners protect their investments, manage uncertainty, and maintain financial stability.

Let’s explore the pros of the LRO policy:

Financial Protection: Commercial claims can escalate quickly and often cost far more than expected. A single fire, slip-and-fall injury, or structural issue can result in expensive repairs, legal fees, and potential settlements. Without coverage, these expenses come directly out of the property owner’s pocket. Lessors risk coverage helps absorb these costs, protecting cash reserves and preventing one incident from threatening years of rental income. This financial protection allows owners to recover more smoothly after a loss and keep the property financially viable.
Peace of Mind for Property Owners: Owning leased property already involves enough uncertainty, from vacancies and tenant turnover to ongoing maintenance responsibilities. Insurance removes a major layer of stress by providing predictable protection against unexpected events. Knowing that the building and liability exposure are insured allows property owners to focus on leasing strategies, tenant relationships, and long-term growth rather than worrying about “what if” scenarios that could disrupt operations or finances.

These benefits align directly with what many property owners value most: cost control, operational efficiency, and reliability.

How Lessors Risk Insurance Differs from Other Insurance Policies

Although there are many, one common question landowners ask is: What is the difference between lessors risk and GL insurance? While they are related and sound similar, they are not the same.

Here are a few key differences at a glance:

Feature	Lessor’s Risk Insurance	General Liability
Who It’s For	Property owners / landlords	Business or property owners
Focus	Building and owner-related liability	Premises and/or operations liability
Property Coverage	Yes (building-related)	No
Tenant Operations	Not covered	Covered only under the tenant’s own GL

In short, Lessors risk insurance is tailored specifically for landlords, while general liability insurance protects businesses from risks tied to their daily operations.

Understanding Cost and Affordability

The cost of lessors risk insurance depends on several factors, and understanding them helps you manage premiums effectively.

Listed below are some factors that affect LRO premiums:

Property Location and Construction Type: Properties located in areas prone to storms, flooding, or higher crime rates typically cost more to insure. Construction materials also matter – fire-resistant materials and modern building systems often result in lower premiums compared to older or less durable construction.
Building Age and Condition: Older buildings may have outdated electrical, plumbing, or roofing systems that increase the likelihood of claims. Well-maintained properties with documented upgrades are usually viewed as lower risk by insurers.
Tenant Industry and Risk Level: The type of tenant occupying the space affects pricing. Low-risk tenants, such as professional small-business offices, generally lead to lower premiums than higher-risk tenants, such as restaurants, auto repair shops, or manufacturing operations.
Coverage Limits and Deductibles: Higher coverage limits provide more protection but increase premiums. Lower deductibles reduce out-of-pocket costs during a claim, but they also raise the overall cost of the policy.
Claims History: Properties with a history of frequent or severe claims are often more expensive to insure because insurers perceive a higher likelihood of future losses.

Tips for Keeping Coverage Affordable

Cost-conscious property owners can take several steps to manage affordability, such as:

Bundle Policies When Possible: Insuring multiple properties or combining policies with the same carrier can often lead to discounted premiums.

Increase Deductibles Strategically: Choosing a higher deductible can lower annual premiums, as long as the deductible remains affordable in the event of a claim.
Invest in Safety Upgrades: Improvements such as better lighting, handrails, security systems, or fire alarms can reduce the likelihood of claims and may qualify the property for insurance credits.
Work With Experienced Insurance Brokers: Brokers familiar with lessors risk insurance companies understand how insurers evaluate risk and can help structure coverage that balances cost, protection, and long-term reliability.

Financial Strength and Ratings of Insurers

Not all insurance providers are created equal. When evaluating lessors risk insurance companies, financial strength should be a consideration to keep in mind. Insurance is ultimately a promise to pay in the future, and that promise is only as reliable as the company backing it.

Choosing a financially stable insurer helps ensure that coverage will be there when a serious claim occurs, not just when premiums are being collected.

Risk Management Resources

Many insurers that offer lessors risk insurance provide additional risk management resources to help property owners identify, prevent, and mitigate potential exposures. These tools provide added protection and help owners take a proactive role in safeguarding their investments.

Some common resources may include:

Property Safety Inspections: Insurers may conduct or recommend regular inspections to identify hazards such as structural issues, fire risks, or slip-and-fall dangers before they turn into claims.
Maintenance and Compliance Checklists: Step-by-step guides help property owners keep buildings in good condition and comply with local regulations, reducing liability exposure.
Tenant Risk Guidelines: Recommendations for screening tenants and managing tenant-related risks, ensuring that occupancy doesn’t create unnecessary liabilities.
Loss Prevention Training Materials: Educational tools and resources that teach owners and staff how to prevent accidents and mitigate risks effectively.
Employment Practices Guidance: Some carriers provide guidance on employment practices, helping property owners establish policies and training for staff to reduce exposure to workplace-related claims.

Strong risk management can significantly reduce the likelihood of claims. Fewer claims often lead to more stable premiums and better renewal terms. Additionally, when claims do occur, well-documented risk management practices can lead to more efficient claims handling and faster resolutions.

In the long run, proactive risk management supports safer properties, better tenant relationships, and more predictable insurance costs.

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