The Answer in 60 Seconds

A commercial lease is a contract that divides the insurance burden between landlord and tenant, and that division is set by the lease's own covenants, not by any statute. In the pattern this guide describes, the landlord insures the building and structure, and the lease may pass the premium on to you, as a separate charge (this guide calls it insurance rent) or within the service charge. You, the tenant, insure everything you bring to or do on the premises: your fit-out and renovations, your contents and stock, your public liability, and your business interruption (the profit you lose while you cannot trade).

The mistake that costs SME tenants real money is assuming the landlord's building policy stretches over their own property and liability. It does not. The landlord's policy answers to the landlord's interest in the structure, and the money it pays goes to the landlord to reinstate the building. Your renovations, your equipment, your stock, a customer who slips in your unit, and the income you lose during a forced closure all sit outside that policy. There is no Singapore statute that allocates these for you. The allocation lives in the insuring covenant, the repairing covenant, and any reinstatement and waiver of subrogation wording in your lease. Read those clauses, then insure to match them.

The Sourced Detail

Commercial leasing insurance is mostly a matter of contract. Singapore has no statute that tells a landlord and tenant who insures the roof and who insures the stock; the lease decides, and different leases decide differently. That is why the single most useful thing you can do is read your own insuring and repairing covenants rather than rely on a market "norm". What follows is the typical pattern and the clauses that create it, so you can map your own lease against it.

The landlord insures the building, and you usually pay for it

Where the landlord keeps the building insurance, the lease may record it as a landlord's covenant to insure the building, the structure and sometimes the landlord's fixtures, against fire and a list of other perils, and may set the basis, such as full reinstatement cost. This is the landlord's insuring covenant. The landlord does this to protect its own asset: the insurable interest sits with the owner of the structure, and the proceeds of that policy belong to the landlord, to be applied to rebuilding.

The premium need not stay the landlord's cost. A lease may let the landlord recover it from the tenant, either as a separate line (insurance rent) or within the service charge. Where yours does, you are paying for a policy that does not protect your property and whose proceeds you have no claim to. That is not a defect in the lease; it is how the allocation is designed to work. The point to absorb is that paying the building premium does not buy you any cover for your own fit-out, contents, or liability. It buys the landlord cover for the landlord's building.

A second feature may ride alongside the insuring covenant: the lease may require the landlord to insure on a reinstatement basis, meaning the policy is sized to rebuild rather than to pay the depreciated market value. The difference between those two settlement bases, and why under-sizing the sum insured triggers the average clause, is its own subject; we cover it in reinstatement cost versus indemnity value for property cover and in the average clause and underinsurance in Singapore. For the landlord's building policy, the sum insured is the landlord's responsibility to get right, but a shortfall can still reach you indirectly if the lease makes you contribute to the reinstatement gap.

What the tenant has to insure, and why the building policy never reaches it

Everything you bring to the unit or do inside it is yours to insure. In practice that means four distinct exposures, and a tenant who covers only one or two has a gap.

Fit-out, renovations and tenant's improvements. When you spend on partitions, flooring, a shopfront, cold rooms, or a kitchen, those works become valuable property that the landlord's building policy may not cover. Whether they belong to you or, on installation, to the landlord depends on the lease, but the building policy covers only the property the landlord chose to insure, and its sum insured may not include your renovation spend. If a fire guts your unit and the landlord's policy covers only the shell, your half-million-dollar fit-out is gone unless you insured it. The fit-out can be the largest single sum a tenant has at risk, and it is easy to assume it is "covered by the building".

Contents and stock. Your equipment, furniture, IT, and trading stock are plainly your property and plainly outside the landlord's policy. A retailer's inventory, a clinic's instruments, a workshop's machinery: none of this is the landlord's to insure.

Public liability. If a customer is injured in your unit, or your operations damage a neighbour's property, the claim is against you as occupier, not against the landlord as owner. The landlord's building policy does not respond to your liability to third parties. A lease may require the tenant to carry public liability cover at a stated minimum limit: JTC's standard terms for its space, for example, require a policy in the tenant's and JTC's joint names with a limit of not less than S$1 million for each occurrence. For a retail lease covered by the Lease Agreements for Retail Premises Act 2023, the lease must not require a limit above S$3 million or the landlord's own public liability limit, whichever is lower, unless the premises are larger than 15,000 square feet.

Business interruption. If a covered event shuts you down, the landlord's reinstatement of the building does nothing for the profit you lose, the wages you keep paying, or the rent that may keep running while you cannot trade. Business interruption cover is the tenant's to arrange.

The reason none of these reaches the building policy is insurable interest. The landlord's policy answers to the landlord's interest in the structure. Your fit-out, stock, liability, and lost income are your interests, and an insurer pays the party whose interest is insured. A tenant is not an insured under a policy it neither arranged nor is named on, and paying the premium through insurance rent does not change that.

The repairing and reinstatement covenants set the obligations the insurance has to meet

Insurance in a lease does not stand alone; it backs the repairing and reinstatement obligations the lease imposes, and reading those tells you what your cover actually has to deliver.

The repairing covenant allocates who must keep what in repair. A tenant on a full repairing obligation for the interior must restore the unit after damage, which is exactly why fit-out and contents cover matters: the cover is what funds the obligation you have already signed up to. At lease end, a separate reinstatement or "make good" obligation usually requires the tenant to strip out its alterations and return the unit to its original condition, at the tenant's cost. That make-good liability is a budgeting item rather than an insurance one, but it interacts with how you insure your fit-out, since a destroyed fit-out you were also obliged to remove changes the economics of a claim.

Where damage is caused by an insured peril, well-drafted leases suspend the rent (a rent cessation or rent abatement clause) while the premises are unusable, and require the party who holds the building policy to apply the proceeds to reinstatement. If your lease lacks a clear rent cessation clause, you may be paying full rent on a unit you cannot occupy after a fire, which is precisely the scenario business interruption cover is meant to bridge. Read the rent suspension wording alongside your business interruption sum insured so the two line up.

Waiver of subrogation and the third-party point

Two pieces of legal machinery deserve attention because they decide who can sue whom after a loss.

The first is subrogation. When an insurer pays a claim, it generally steps into the insured's shoes and can pursue whoever caused the loss to recover what it paid. Without protection, a landlord's insurer that pays for fire damage could turn around and sue the tenant whose negligence started the fire, even where the tenant effectively funded the policy through insurance rent. To stop this, a lease can include a waiver of subrogation in the tenant's favour, or require the landlord to procure that the building policy waives subrogation against the tenant. If your lease makes you contribute to the building premium, check that this waiver is present; without it you can pay for a policy and still be sued under it. The mechanics of these clauses are set out in the standard waiver of subrogation clause.

The second is the third-party question. A tenant is often not a named insured on the landlord's building policy, so it cannot ordinarily enforce that policy directly. Singapore's Contracts (Rights of Third Parties) Act 2001 can, in principle, let a person who is not a party to a contract enforce a term that the contract expressly confers on them or that purports to benefit them, under section 2 of that Act. The tenant is already a party to the lease, so the Act matters only for the landlord's policy. It helps there only if the policy identifies the tenant by name, as a member of a class or by description, and either expressly lets the tenant enforce a term or contains a term that purports to benefit the tenant and does not show that the parties intended otherwise. Some policy wordings exclude the Act outright. Do not assume you have an enforceable interest in the landlord's policy; assume you do not, unless the documents say so in terms.

The broader anatomy of insurance clauses in commercial contracts, including minimum limits, certificates, and notification, is covered in standard insurance clauses in commercial contracts. A lease is one species of that wider genus.

A note on sourcing

This is mostly contract mechanics, so there is little statute to cite. The Contracts (Rights of Third Parties) Act 2001 bears on whether a tenant can enforce a policy it is not named on. For a retail lease of one year or more signed on or after 1 February 2024, the Lease Agreements for Retail Premises Act 2023 also applies: section 6(1) requires the lease to comply with the leasing principles in the Code of Conduct for Leasing of Retail Premises, and the Code bars a lease from requiring a tenant's public liability limit above S$3 million or the landlord's own public liability limit, whichever is lower, unless the premises are larger than 15,000 square feet (Part B, para 2.5.3). Everything else is determined by the words of your particular lease, which is why the practical instruction is to read your insuring, repairing, reinstatement, and subrogation covenants rather than to rely on a market standard that does not exist in legislation.

Common Mistakes

  1. Assuming the landlord's building policy covers your fit-out. It covers the property the landlord chose to insure, which may not include your renovations, and those can be your largest sum at risk.

  2. Treating insurance rent as your insurance. Paying the building premium through the lease buys the landlord cover for the landlord's building. It buys you nothing for your own property, liability, or lost income.

  3. Insuring contents but forgetting business interruption. Stock and equipment cover replaces things. It does nothing for the profit and ongoing costs you carry while the unit is shut. The two are separate decisions.

  4. Ignoring the public liability limit the lease demands. Many leases require a stated minimum public liability limit. Carrying less, or nothing, is a breach as well as an uninsured exposure.

  5. Overlooking the make-good obligation. The reinstatement clause that requires you to strip out alterations at lease end is a real cost to budget for, and it interacts with how a fit-out claim settles.

  6. Not checking for a waiver of subrogation. If you fund the building premium but the policy can still subrogate against you, you can pay for the cover and be sued under it after a loss you caused.

  7. Assuming a third-party right to the landlord's policy. You usually are not a named insured, and the landlord's policy may exclude the Contracts (Rights of Third Parties) Act 2001 outright. Do not rely on enforcing a policy you cannot see.

What This Means for Your Business

If you are signing or renewing a commercial lease, work the insurance allocation as a single exercise, not a box to tick at the end.

Start by reading the insuring covenant to see exactly what the landlord insures and what you are paying for through insurance rent. Then read the repairing and reinstatement covenants to see what obligations sit on you: your property cover can fund repair after insured damage, while the end-of-lease make-good is a cost to budget for rather than an insured one. Map the four tenant exposures, fit-out, contents and stock, public liability, and business interruption, against your actual numbers: the real cost to rebuild your renovation, the real value of your stock, the public liability limit your lease names, and the months of lost profit a closure would cost. Underinsuring the fit-out runs straight into the average clause.

Then check the protective machinery. Confirm whether the lease has a rent cessation clause so you are not paying rent on a unit you cannot use after a fire, and confirm there is a waiver of subrogation if you are contributing to the building premium. If either is missing, that is a negotiation point before signing, not a discovery after a loss.

Covarage helps with the part that quietly goes wrong here: keeping the lease, the building insurance evidence, your fit-out and contents schedule, your public liability and business interruption policies organised in one place, with every renewal date visible in one place, and a route to a licensed adviser when you need to size or compare the cover the lease actually requires.

Questions to Ask Your Adviser

  1. Reading my insuring covenant, exactly what does the landlord insure, and what am I paying for through insurance rent?
  2. Is my fit-out and renovation sum insured set to its true reinstatement cost, and does it avoid triggering the average clause?
  3. Does my public liability cover meet the minimum limit my lease names, and does my business interruption cover match a realistic closure period?
  4. Does my lease have a rent cessation clause, and does my business interruption cover line up with how long rent would keep running?
  5. Is there a waiver of subrogation protecting me, given that I contribute to the building premium, and am I a named insured on anything I might need to claim under?

Related Information

Published 31 May 2026. Source verified 31 May 2026.