Insurance insights.(Professional Resources)

After working with MTNA members for nearly three years, we have heard a lot of different scenarios regarding the environment in which a teacher provides instruction. These environments range from a home living room to a church to a school classroom. With so many varying environments, our office has reviewed a lot of situations that may arise within these areas. One recurring item that continues to present itself is the lease agreement--specifically the lease agreement that requires you to provide insurance coverage for compliance.

Before starting a business or providing instruction, music teachers, like any business professionals, have to do a lot of research and homework. And insurance, as it pertains to leases, is one area that needs particular attention. Some lease provisions can lead to insurance exposure if they are not reviewed carefully so the proper coverage is provided. Different lease agreements may require the tenant to purchase insurance that may or may not provide adequate coverage at the time of loss. Your insurance agent should look for a way to insure the part of the building that is in your care, custody and control (for example, through a legal liability coverage form).

Another section of the lease agreement refers to a tenant's improvements and betterments. This portion of the agreement is the most difficult to insure. Ask an insurance agent to review the property coverage to understand exactly what is covered.

According to the American Association of Managing General Agents; "Your use interest as tenant improvements and betterments (emphasis mine) is what becomes important when you consider valuation." If a lease is not specific regarding the improvements and betterments or completed additions, it may be necessary for both the tenant and landlord to provide insurance coverage.

An abatement clause is a section of most lease agreements dealing with damage to the portion of the building that may not be occupied by the tenant. This clause may give the tenant or the landlord the right to terminate a lease if repairs to other parts of the building take longer than a specified timeframe. A tenant then loses the use of the improvements and betterments, although no loss has been incurred by them. A leasehold interest form can ...