Insurance in NNN Leases — Coverage, Evidence, and the Gaps

In a true NNN structure the tenant insures the property — but “the tenant handles it” is where landlord attention should start, not stop. Coverage gaps discovered at claim time are uninsurable.

The standard allocation

Tenant carries property coverage (full replacement cost, landlord as loss payee), commercial general liability (landlord as additional insured), and business interruption for its own account. Landlord obligations shrink toward zero on absolute paper — though many owners keep a thin contingent/DIC policy against the gap scenarios: tenant coverage lapses, casualty disputes, liability suits naming the owner directly. It’s cheap insurance on someone else’s insurance.

The evidence discipline

Leases entitle you to certificates of insurance; portfolios live or die on actually collecting them. The working system: certificates on file for every property, renewal dates calendared, additional-insured and loss-payee endorsements verified (the certificate’s checkbox isn’t the endorsement — ask for the endorsement), and carrier-rating floors enforced where the lease sets them. A tenant who stops sending certificates is telling you something a rent check can’t.

The 2026 squeeze

Premium inflation — coastal wind, hail-belt roofs, liability severity — lands inside tenant occupancy costs on NNN deals, which makes it your underwriting input even though it’s their invoice: rent-plus-insurance-plus-taxes against store economics is the renewal-probability math. Coastal Florida deals especially deserve current premium reality in the model, plus a read of the casualty clause — who rebuilds, at whose election, and whether the tenant can terminate after a major loss. The lease’s insurance article was boilerplate for twenty years; climate repriced it into diligence.