Building Insurance in CAM Reconciliation
Property and liability insurance coverage maintained by the landlord to protect the building, common areas, and the landlord's interest. Includes property (fire, wind, flood), general liability, umbrella/excess liability, and may include terrorism, earthquake, and environmental coverage.
Benchmarks per SF
Source: BOMA EER / IREM 2024
Typical GL Codes
Recoverable Components
- Property insurance premiums
- General liability insurance
- Umbrella/excess liability
- Terrorism insurance (if required by lender)
- Earthquake/flood insurance (if required)
Non-Recoverable Components
- Landlord's loss of rent insurance (benefits landlord only)
- Construction-period insurance
- Insurance deductibles (varies by lease)
- Director & officer insurance
Allocation Method
Pro-rata by rentable square footage. Insurance is a fixed cost, not subject to gross-up regardless of occupancy level. Some leases allow landlords to charge higher rates to tenants whose operations increase the building's risk profile (restaurants, chemical storage).
Common Lease Language
“Tenant shall pay Tenant's Proportionate Share of Insurance Costs, defined as all premiums and costs for insurance maintained by Landlord with respect to the Building, including property, liability, umbrella, and such other coverages as Landlord reasonably determines necessary.”
Common Billing Errors
- Grossing up insurance premiums (insurance is a fixed cost)
- Including loss-of-rent insurance in recoverable costs
- Passing through insurance deductibles as CAM without lease authority
- Failing to rebid insurance competitively, resulting in above-market premiums
Year-over-Year Trends
Commercial property insurance rates increased 15-25% in 2023-2024, driven by catastrophic weather events, rising replacement costs, and insurer exits from high-risk markets. Coastal and wildfire-prone properties have seen 30-50% increases. Landlords are increasingly self-insuring higher deductibles to manage premium costs.
Audit Flags for Building Insurance
Review this category before tenant statements go out when the GL activity, lease language, or benchmark range moves out of pattern.
- Compare current-year spend to prior-year actuals and budget by account.
- Separate contract base charges from one-time repairs, credits, and late invoices.
- Check whether the lease treats this category as controllable, non-controllable, or excluded.
- Verify that direct tenant charges are not also included in the shared CAM pool.
- Retain invoices for material variances in the audit support package.
Additional Context
Insurance is the CAM line item most affected by factors beyond the landlord's control. Tenants should verify that the landlord is obtaining competitive quotes and not over-insuring the property. Some sophisticated tenants negotiate insurance audit rights or require the landlord to obtain at least three competitive bids annually.
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