The method by which a building's total insurance premium is divided among tenants. Allocation can be based on rentable square footage, insured value of tenant improvements, risk profile, or a combination. Incorrect allocation is a common source of CAM overcharges.
Insurance premium allocation distributes the building's total insurance cost among tenants, typically using one of three methods: pro-rata by square footage (most common), risk-based allocation (higher-risk tenants pay more), or flat allocation per tenant. When a landlord owns multiple properties under a blanket insurance policy, the premium must first be allocated to each building before being distributed to tenants. Multi-property allocation errors are particularly common and difficult for tenants to detect without seeing the policy.
A landlord owns five buildings under a single blanket insurance policy with a total premium of $500,000. Instead of allocating $100,000 to each building based on insured value, the landlord charges $150,000 to the building with the most tenants (who are least likely to question the amount) and less to buildings with single tenants who negotiate harder.
Ask whether your building's insurance is part of a blanket policy covering multiple properties. If so, request documentation showing how the total premium is allocated to your building. The allocation should be based on insured value, square footage, or another objective measure applied consistently.
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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.
