If you own a commercial building and lease space to tenants, you face risks that a regular business doesn't. Lessor's Risk Insurance is designed specifically for commercial property owners, helping protect your building, your liability and the rental income your property generates.
Whether you own an office building, retail center, warehouse, restaurant, strip center or another type of commercial property, the right coverage depends on your building, who's leasing it, the agreements you have in place and how the property is managed.
Understanding those risks - and where gaps in coverage can occur - is an important part of protecting both your property and the income it produces.
What Is Lessor's Risk Insurance?
Lessor's Risk Insurance, also known as Lessor's Risk Only (LRO) Insurance, is designed for commercial property owners who lease all or part of their building to tenants.
It's different from the insurance your tenants carry for their businesses. While your tenants are generally responsible for insuring their own business operations, inventory, equipment and employees, you need coverage for the building you own, your liability as the property owner and potentially the rental income that building generates.
Whether you own one commercial property or a portfolio of income-producing buildings, your policy should reflect what you own, who's renting it, the terms of your leases and the risks associated with the way each property is used.
What Does Lessor's Risk Insurance Usually Cover?
Exactly what's covered will depend on your property, tenants, insurer and policy. However, Lessor's Risk Insurance will typically focus on a few key areas.
The Building
Your policy can help protect the building itself against covered losses such as:
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Fire
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Storms
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Vandalism
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Certain types of water damage
Depending on your policy, coverage may also extend to permanently attached fixtures and other structures on the property.
Your Liability as the Property Owner
Owning a commercial property also comes with liability risks.
If someone is injured in a common area or claims that a condition at your property caused bodily injury or property damage, your liability coverage can help protect you against covered claims and associated legal costs.
Loss of Rental Income
If a covered loss leaves your building temporarily unusable and your tenants are unable to occupy the space, you could lose rental income while repairs are being made.
Depending on your policy, loss of rental income coverage may help replace some of that lost income during the covered recovery period.
Additional Coverage Options
Depending on your property and the way it's used, there may be other coverages worth considering, including:
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Higher liability limits
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Ordinance or law coverage
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Equipment breakdown coverage
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Coverage for vacant properties
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Other endorsements specific to your building and its risks
What Is Your Tenant Responsible for Insuring?
Lessor's Risk Insurance is designed to protect you as the property owner. Your tenants are generally responsible for protecting their own business, property and operations.
Depending on their business and the terms of the lease, tenants may need insurance for things such as:
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Business equipment and machinery
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Inventory and stock
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Furniture and office contents
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Business interruption and loss of income
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Employee injuries and workers' compensation
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Liability arising from their own business operations
Your Lessor's Risk Insurance, on the other hand, is designed to protect your interests as the property owner, including the building, your liability and other covered risks associated with leasing commercial property.
This is why it's important to review your insurance alongside your lease agreement. You want to understand who's responsible for what before a loss happens - not discover a gap in coverage after you've already got a claim.
What Insurance Should Your Tenants Carry?
The insurance your tenants need will depend on the type of business they're running and the requirements you've set out in the lease.
A professional office presents very different risks from a restaurant, gym, retail store or manufacturing business, so there isn't one set of insurance requirements that's right for every tenant.
Depending on the business and the terms of your lease, you may require tenants to carry:
Commercial General Liability
This helps protect the tenant against covered claims of bodily injury or property damage arising from their business operations.
Commercial Property Insurance
This can protect property the tenant owns inside your building, such as equipment, inventory, furniture, machinery and other business property.
Workers' Compensation
If your tenant has employees, workers' compensation may be needed depending on the business and applicable requirements.
Other Business Insurance
Some businesses bring additional risks. Depending on what your tenant does, they may need commercial auto, professional liability, cyber liability, liquor liability or another type of specialized coverage.
It's also good practice to request a current Certificate of Insurance (COI) when required by your lease and check that it reflects the insurance requirements you've agreed upon.
And don't necessarily treat it as a one-time job. Policies expire, insurers change and businesses evolve, so keeping tenant insurance records up to date can help you spot potential issues before they become bigger problems.
Common Insurance Mistakes Commercial Property Owners Make
Even experienced property owners can overlook important details when it comes to insurance. Here are some of the most common issues worth watching for.
Assuming Your Tenant's Insurance Covers Your Building
Your tenant's insurance is generally there to protect their business — not the commercial building you own.
Their policy and your Lessor's Risk Insurance have different jobs to do, which is why it's important to understand exactly what each party is responsible for insuring.
Not Checking Your Insurance Against Your Lease
Your lease should make it clear which insurance responsibilities belong to you and which belong to your tenant.
If the requirements in the lease don't line up with the insurance that's actually in place, you could find yourself with an unexpected gap when you need coverage most.
Underinsuring Your Building
The cost of repairing or rebuilding a commercial property changes over time.
If you haven't reviewed your building's replacement value recently, the amount it's insured for may no longer reflect what it would actually cost to rebuild following a major covered loss.
Not Keeping Certificates of Insurance Up to Date
Getting a COI when your tenant first moves in is a good start, but it shouldn't necessarily be the last time you check.
Tenant policies renew, expire and change. Requesting updated Certificates of Insurance can help you confirm that the coverage required under your lease remains in place.
Treating Every Tenant as the Same Risk
Who's inside your building matters.
An accountant's office doesn't present the same risks as a restaurant, gym, auto-related business or manufacturer. If your tenants change, it's worth reviewing whether the risks associated with your property have changed too.
Before Leasing Your Commercial Property
Before signing a new lease or handing over the keys to a new tenant, there are a few things worth checking:
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Review your lease and make sure each party's insurance responsibilities are clearly defined.
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Make sure your Lessor's Risk Insurance reflects how the property is actually being used.
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Request a current Certificate of Insurance from your tenant when required by the lease.
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Check that the tenant's insurance meets the requirements set out in your agreement.
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Review the replacement value of your building regularly.
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Tell your insurance agent about significant renovations, occupancy changes or changes in the types of businesses renting your property.
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Review your insurance whenever you purchase another property or make significant changes to an existing one.
A little work upfront can make things considerably easier if you ever need to make a claim.
Frequently Asked Questions About Lessor's Risk Insurance
What Is Lessor's Risk Insurance?
Lessor's Risk Insurance, sometimes called Lessor's Risk Only or LRO Insurance, is designed for people who own commercial buildings and lease all or part of them to other businesses.
It can help protect the building itself, your liability as the property owner and, when included in your policy, rental income lost following a covered loss.
Is Lessor's Risk Insurance the Same as Commercial Landlord Insurance?
The terms are sometimes used interchangeably.
Lessor's Risk Insurance is a type of coverage designed for owners who rent commercial property to tenants. Exactly what's included will depend on the property, insurer and policy.
Do I Need Lessor's Risk Insurance if My Tenants Already Have Insurance?
Your tenant having insurance doesn't normally mean your building is protected.
Their insurance is generally intended to cover their business, equipment, inventory, employees and liability. As the property owner, you still need to consider your building and your own liability exposure.
That's where Lessor's Risk Insurance comes in.
Does Lessor's Risk Insurance Cover Lost Rental Income?
It can.
Many policies can include coverage for rental income you lose if a covered loss leaves your property temporarily unusable and your tenants are unable to occupy it.
Exactly what's covered, for how much and for how long will depend on your individual policy, so it's important to check rather than assume.
Does Lessor's Risk Insurance Cover Vacant Buildings?
Not necessarily.
If your commercial property sits vacant for a certain length of time, your standard policy may limit or exclude some types of coverage.
If a tenant moves out and the building is going to be empty for a while, let your insurance agent know. You may need different coverage or an additional endorsement while you're waiting for a new tenant.
How Much Lessor's Risk Insurance Do I Need?
There's no single amount that's right for every commercial property owner.
The amount of coverage you need can depend on the replacement value of your building, the types of tenants occupying it, the terms of your leases, your liability exposure and the amount of rental income the property generates.
This is one reason it's worth reviewing the property properly before deciding on your coverage limits.
How Much Does Lessor's Risk Insurance Cost in Texas?
There's no standard price because no two commercial properties present exactly the same risk.
Insurance companies may consider factors such as the building's size and value, location, construction, age, occupancy, tenant types, claims history, coverage limits and deductibles when determining the cost.
The best way to understand what Lessor's Risk Insurance could cost for your Texas property is to get a quote based on the actual building and how it's being used.
Can Thumann Agency Review My Existing Lessor's Risk Insurance?
Absolutely.
If you already have a policy, we can review your current coverage, talk through your property and tenants, discuss your lease requirements and help identify areas that may need another look.
Whether you're renewing a policy, buying another property or simply haven't reviewed your coverage for a while, we're happy to help.
Lessor's Risk Insurance for Texas Property Owners
Every commercial property is different. The right insurance depends on the building, how it's used, the types of tenants you lease to and the risks that come with the property.
At Thumann Agency, we work with commercial property owners across Texas to help them understand their risks, identify potential gaps in coverage and find protection that makes sense for their property.
As an independent Texas insurance agency, we have access to multiple insurance carriers, allowing us to explore coverage options based on your property, your tenants and your individual needs.
If you own commercial property in Texas and would like to review your existing coverage or discuss Lessor's Risk Insurance, our team is here to help.
Get a Lessor's Risk Insurance Quote - Call 972.991.9100
Last Updated: August 25, 2026
Author: Lauren Thumann Director of Marketing.
This post is for informational purposes only. For questions specific to your policy or situation, please contact the Thumann Agency directly. For regulatory questions, contact TDI at www.tdi.texas.gov.