Title: What are Tenants' Improvements and Betterments? - Definition from Insuranceopedia
Headings: Tenants' Improvements and Betterments
Tenants' Improvements and Betterments
What Does Tenants' Improvements and Betterments Mean?
Insuranceopedia Explains Tenants' Improvements and Betterments
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Insuranceopedia Explains Tenants' Improvements and Betterments
When a tenant makes valuable improvements to a building, it adds to the building’s value. The building owner should either increase the limits of the property insurance policy to account for this extra value, or add a clause to the rental contract stating that the tenant is responsible for damages to improvements and betterments. If they don’t, the building owner will run into trouble when should they be forced to make an insurance claim. For example, suppose that a building owner has a property worth $1 million and that a tenant makes $250,000 worth of additions. A fire then destroys the entire building. When the insurance adjuster inspects the claim, they will value the property at $1.25 million. Many property insurance companies will charge the owner a penalty for being underinsured in this case. Advertisement
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