Why Lessors Risk Insurance Is a Must for Net Lease Investors

Introduction

Net lease investments are often marketed as passive assets: predictable, secure, and simple. But any landlord who has been in the space long enough knows that this hands-off dream can come with some very real, and very costly, exceptions.

One of the most overlooked risks for single tenant property owners is the assumption that tenant insurance will always protect them in case of an incident. Unfortunately, that is not always true, and when it is not, the landlord is the one left exposed.

In this article, we will break down what lessors risk insurance is, why it matters, and how unexpected exposures can create significant financial and legal headaches. You will also see a real-world scenario that underscores just how important this coverage can be and how Trinety can help you avoid getting caught off guard.

What Is Lessors Risk Insurance?

Lessors risk insurance is a form of liability insurance carried by the landlord or property owner. It is specifically designed to protect the owner in the event that someone is injured on the property, and the tenant’s policy does not respond to the claim.

In single tenant net lease investments, this type of insurance is frequently overlooked. Many owners assume that because the lease requires the tenant to carry insurance that names the landlord as an additional insured, they are automatically covered in all situations.

That is not always the case.

Why Relying on Tenant Insurance Alone Is Not Enough

Even with a well-written lease and a diligent tenant, there are scenarios where tenant insurance might not apply. These fringe cases can expose the landlord to liability, often with significant financial consequences.

Here is a real-world example:

A person visits a property at 3:00 AM and trips over a parking lot curb, resulting in serious injuries and expensive medical bills. They sue the landlord for damages.

The landlord turns to the tenant’s insurance carrier for defense, as the lease requires. But the claim is denied. Why? The visitor was not a customer or invitee of the tenant, and the business was closed at the time.

Now, the landlord is left to either:

• Hire legal counsel at their own cost to force the tenant to comply (an uphill battle), or
  
  
• File a claim under their own lessors risk policy, which provides defense and coverage.
  
  

In this situation, the landlord who had a lessors risk policy was protected. The one who did not? They paid legal fees out of pocket and potentially settled a claim that should have been covered.

Common Scenarios Where Lessors Risk Insurance Is Critical

While many incidents will be covered by tenant insurance, the following edge cases often are not:

• Injuries that occur after hours when tenants are not open
  
  
• Loiterers or trespassers injured on-site
  
  
• Property defects that are not the tenant’s responsibility
  
  
• Lease terms that are unclear or contested
  
  
• Tenant policy limits that are insufficient or coverage that has lapsed
  
  

These situations do not happen every day, but when they do, they can be financially devastating without lessors risk protection.

Why Most Investors Do Not Underwrite for This Cost

Despite its importance, lessors risk insurance is often left out of the underwriting process entirely. Many investors overlook it, assuming their exposure is zero. Others treat it as optional, especially if their lender has not required it yet.

But most commercial lenders do require lessors risk coverage, and not just to protect themselves. It also protects you, the borrower, from unexpected liability that could compromise your investment returns or lead to costly litigation.

Leaving this line item out of your underwriting can result in:

• Unaccounted annual costs that reduce net yield
  
  
• Unexpected legal expenses that were not budgeted
  
  
• Assumption of risk without recourse

Pro tip: Lenders are increasingly requiring lessors risk coverage when the landlord or borrower is not the primary holder of the liability policy. Ask yourself why — if lenders are protecting their position with this coverage, shouldn’t you? They usually know the right way to structure risk. Follow their lead.

Trinety One: Coverage That Pays for Itself

At Trinety, we have seen too many net lease owners face unexpected challenges from gaps in insurance. That is why we offer lessors risk and other essential coverages through Trinety One, our all-in-one management solution that includes access to a robust blanket insurance policy.

Here is how Trinety One helps:

• Includes lessors risk coverage as part of a broader insurance solution
  
  
• For many owners, the premium savings through our blanket policy exceeds the cost of Trinety One
  
  
• Avoids gaps, denial appeals, and lengthy disputes with tenants and insurers
  
  

This is how Trinety delivers on its promise to bring professional-grade management to individual net lease owners without the administrative burden.

Related Trinety Insights

For deeper insights into proactive ownership and risk management, check out these related articles:

• Active vs. Passive Net Lease Management This article explores how “passive” investments often come with active responsibilities, and how to manage them smartly.
  
  
• What Triple Net Really Means A breakdown of common misconceptions about NNN leases, including what is and is not truly the tenant’s responsibility.

‍Conclusion

Lessors risk insurance is more than a footnote in your net lease strategy. It is a critical safety net. While most tenant leases appear to offer strong protection, reality often proves more complex. Fringe scenarios, claim denials, and disputes can leave you exposed and unprepared.

By proactively securing lessors risk coverage, you protect yourself from unnecessary financial risk and legal headaches. And with Trinety One, you can do so while simplifying your entire ownership experience.

Ready to protect your investment the right way?

Learn how Trinety One can cover your liability and more →

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