The annual process of reconciling estimated insurance pass-through payments with actual insurance premiums incurred. Insurance is typically an uncontrollable expense passed through at actual cost in NNN leases.
Insurance pass-throughs should reflect only the cost of insurance directly covering the property. Common overcharges include: allocating umbrella policy costs across unrelated properties; applying gross-ups to fixed insurance premiums; and double-billing during policy transitions.
A landlord's property management company carried a portfolio umbrella insurance policy covering 35 properties. Rather than allocating actual policy costs, they charged each property a 'fair share' estimate - resulting in tenants subsidizing insurance for other properties.
Request the actual insurance declarations page(s) and the landlord's allocation methodology. The insurance billed should directly correspond to coverage on your property, not a portfolio estimate. Property managers preparing insurance reconciliations can automate allocation with CapVeri.com.
Worried about insurance reconciliation in your lease?
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Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
