When you sublet an apartment through your Limited Liability Company (LLC), there are specific considerations regarding how the LLC’s liability policy might or might not apply. Generally, an LLC’s liability insurance is designed to protect the business from claims related to business operations. However, the applicability of this policy to a sublet situation can depend on several factors:
Policy Coverage: The primary step is to review the terms of your LLC’s liability policy to see if it includes coverage for liabilities arising from real estate activities. Some general liability policies may not automatically cover rental operations unless specifically stated.
Business Purpose: The sublet activity must align with the business purposes of your LLC. If the LLC was not initially set up to handle real estate or leasing activities, your insurer may argue that this falls outside the policy’s scope.
Insurance Endorsements: It may be necessary to purchase an endorsement or a separate insurance policy to cover the specific risks associated with leasing the apartment. This can include tenants’ liability or property damage that occurs during the sublease.
Local Laws and Lease Agreements: Ensure compliance with local laws governing subletting and adhere strictly to the lease terms with the property owner. Some lease agreements prohibit subletting or require the landlord’s consent, which could impact your insurance coverage if not obtained.
Insurer Notification: Informing your insurer about the sublease is critical. They need to be aware of how the property is being used to properly assess the risk and ensure appropriate coverage.
Therefore, if you’re considering subletting an apartment through your LLC, it’s prudent to consult with your insurance provider to clearly understand how your policy treats such arrangements and to obtain any additional necessary coverage to mitigate potential risks.
