Thursday, August 16, 2012

Leasehold Insurance In The Post Subprime Mortgage Crisis World

Given that it is now much harder to make an honest profit in our post subprime mortgage crisis world, should business start-ups avail themselves of leasehold insurance? 

By: Ringo Bones 

Although it is the intention of the standard fire insurance policy to protect against direct losses, protection of indirect losses by endorsement has since been widely developed. Among the forms of insurance that have been developed is the leasehold insurance – which can be a business start-up lifesaver in the austere economic environment of our post subprime mortgage crisis world. 

There may be a lease on the building for a stated number of years. If the lease states that it is terminated by a fire in a given proportion of a building and the amount of rent that would have to be paid for similar quarters is higher than under the lease, then a leasehold insurance may be obtained by the lessee. 

A lessee of a certain business property may have obtained a lease at a very favorable rental, for example, annual rental may be 15,000 US dollars for 20 years. However, if the building is destroyed by fire and the lessee had to obtain other similar premises, he or she might have to pay 18,000 US dollars annual rental. Leasehold insurance is available for a lessee to protect him or her against the additional cost that he or she would have to pay under such circumstances. 

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