Key takeaways
- In Malaysia a landlord can require a shop or factory tenant to buy insurance through the tenancy agreement, because business rentals are governed by the written agreement and contract law rather than one landlord and tenant act.
- The landlord's fire policy covers the building only: one Kuala Lumpur tenancy agreement states the landlord's cover is not inclusive of the tenant's raw materials, equipment, furniture, fixtures and fittings.
- Typical clauses ask the tenant to insure stock and fittings against fire and theft, carry plate glass and public liability cover, send copies of the policies, and avoid anything that voids or raises the premium of the landlord's policy.
- A shop package such as Great Eastern General's Easi-Biz covers contents, theft with forcible entry, plate glass, money, employer's liability up to RM2,000,000 and public liability up to RM1,000,000 plus RM20,000 legal fees.
- For business insurance, Schedule 9 of the Financial Services Act 2013 requires you to disclose anything relevant before the policy is taken out, varied or renewed, so declare your real trade and any change of use.
- Rent relief after a fire depends on the clause: one sample agreement suspends rent while the premises are unusable, but not when the fire was caused by the tenant's default or negligence.
Can a landlord require a tenant to buy insurance in Malaysia?
Yes, when it is written into the tenancy agreement you sign. Malaysia does not have one complete landlord and tenant law for shops, offices and factories. As EdgeProp's October 2026 guide puts it, rentals still lean on the written tenancy agreement, basic contract law, land law, stamping rules and the courts. So the insurance clause is a contract term, just like the rent, the deposit and the permitted use.
That works both ways. What binds you is what you signed, and a law firm's commercial tenancy FAQ makes the same point about rent: it cannot be raised during a fixed term unless the agreement provides for it. Read the insurance clause, and any fit-out rules, before you sign, because that is when you can still ask for changes.
Commercial agreements say far more about insurance than a house rental does. EdgeProp lists whether the tenant must keep public liability insurance among the points a commercial agreement should settle, and notes that a landlord may ask for insurance, licensed contractors and deposits before you renovate. Some agreements also pass part of the landlord's costs to the tenant, such as quit rent, assessment or insurance, where agreed.
| What the landlord may ask for | Where it usually sits | What to ask before signing |
|---|---|---|
| Fire (and often theft) cover on your stock, fittings and equipment | Insurance clause | Which perils, and whether renovation must be included |
| Public liability at a stated limit | Insurance clause | The minimum limit in ringgit, in writing |
| Copies of your policies, and notice of cancellation, changes or renewal | Insurance clause | Who receives them and by when |
| Insurance during your renovation works | Fit-out rules or renovation approval | Whether your contractor's cover is enough |
| A share of the building's insurance premium | Service charge or reimbursement clause | A full breakdown of the monthly charges |
| More cover later, at the landlord's discretion | Insurance clause | A cap, or reasonable notice before any increase |
This guide is general information, not legal advice. If a clause is unclear or unusually heavy, ask your lawyer to look at it before you sign.
Who insures what in a rented shop or factory?
Think of the premises in layers. The landlord owns the shell. You own what you put inside it, and you run the business there. Two Kuala Lumpur commercial tenancy agreements that are publicly available show the split in their own words: in one, the landlord insures the premises against fire "but not inclusive of the tenant's raw materials, equipment, belongings, furniture, fixtures and fittings"; in the other, the service charge includes the building's insurance premium "excluding the assets of the Tenant".
| What | Usually insured by | Type of cover | Watch out for |
|---|---|---|---|
| Building: structure, roof, walls | Landlord | Fire policy on the building, sum insured on rebuilding cost | You may pay part of the premium through service charges |
| Fixtures the landlord provides (lights, air-conditioning, shutters) | Whoever the clause names | Fire or property cover | One agreement makes the tenant insure the landlord's fixtures and fittings |
| Your renovation and fit-out | Tenant | Fire or property all risks, on your contents | Often the biggest item left out of the sum insured |
| Stock, raw materials, goods | Tenant | Fire and perils, theft with forcible entry | Stock at its highest level, not its average |
| Machinery, equipment, furniture, computers | Tenant | Fire or property all risks; machinery breakdown | Breakdown is a separate section from fire |
| Shopfront and display glass | Tenant, if the clause says so | Plate glass | Often named in shop clauses |
| Your income while you are closed | Tenant | Inconvenience allowance or consequential loss | Damage cover alone does not pay lost income |
| Injury to customers inside your unit | Tenant, as the occupier | Public liability | The landlord answers for common areas it controls |
| Your staff | Tenant, as the employer | PERKESO, plus employer's liability | Check the employer's liability limit |
The building's sum insured should be based on the cost of rebuilding, not the market value of the property, which includes the land, as InsuranceInfo explains. That is the landlord's job, but it matters to you: if the building is under-insured, rebuilding can take longer or not happen at all, and your business waits.
Who answers to an injured customer follows control, not ownership. A Malaysian law firm's guide to occupiers' liability gives this very example: a tenant renting a shop lot may be the occupier of the shop lot, while the landlord remains the occupier of common areas such as staircases or lifts. That is why public liability for the inside of your unit is normally yours to buy.
Your employees are protected for work accidents by PERKESO's Employment Injury Scheme, which covers accidents and occupational diseases arising out of and in the course of employment. Employer's liability, a section in most shop packages, pays compensation you are legally liable for when an employee is injured at work, up to the limit in your schedule. My PERKESO guide explains what PERKESO itself pays.
What does the insurance clause in a tenancy agreement usually say?
Wording differs from landlord to landlord, but the same clauses come up again and again. The table below puts the clauses of the two Kuala Lumpur agreements (2004 and 2007) into plain language. Yours may be shorter, longer or stricter.
| Clause | What it says, in plain words | What to check on your side |
|---|---|---|
| Tenant insures its own things | Keep your stock, fixtures, furniture and equipment insured against fire (and theft, in one agreement) and pay the premiums on time | Renovation and peak stock are inside the sum insured |
| List of covers | Insure your goods, the landlord's fixtures and fittings, plate glass, public liability, fire, and claims for injury to employees, visitors or anyone lawfully on the premises | Your package has every section the clause names |
| Proof of cover | Send copies of the policies, and tell the landlord about any cancellation, change or renewal | A renewal reminder, and who sends the schedule |
| More cover on request | The landlord may, at its discretion, require you to increase the scope and amount of cover | Ask for a cap or a notice period |
| Do not void the landlord's policy | Do nothing that makes the landlord's insurance void or voidable or raises its premium; repay any increase, which one agreement adds to the rent | Your actual trade and what you store match what was agreed |
| Indemnity | Indemnify the landlord against claims caused by your or your staff's acts, default or gross negligence | Your public liability limit fits the risk, and what it says about liability taken on under a contract |
| Landlord not liable | The landlord is not liable for your loss of profit or for damage from fire, smoke or overflowing water | Your own business interruption cover |
| Fire damage and rent | If fire makes the premises unfit for use, the rent or a fair part of it is suspended until they are fit again, unless the fire was caused by the tenant's default or negligence; the landlord may end the tenancy on 60 days' notice | What happens to your renovation if the tenancy ends early |
The "do not void the landlord's policy" clause is the one tenants underestimate. The landlord's insurer accepted the building for a certain use. If you start storing solvents, add a commercial kitchen or switch from retail to light manufacturing, that cover can be affected and the landlord can pass the cost to you. LH Low & Associates also notes that most commercial agreements have a permitted use clause, and running a different business without the landlord's written consent may be a breach.
Insurance clauses also sit next to other terms that change what you stand to lose. The same FAQ says renovations need the landlord's prior written consent and you may have to reinstate the premises to their original condition when you leave, so money spent on fit-out is money at risk until the last day of the tenancy.
Shop or factory: which covers does a tenant actually need?
For a small shop, the simplest way to meet a typical clause is a business package rather than separate policies. Great Eastern General's Easi-Biz, for example, covers the contents of the business (furniture, equipment, fixtures and fittings, and stock) against fire, explosion, burst pipes, windstorm, flood, riot and other listed perils, and adds theft with forcible entry, plate glass, money, employer's liability up to RM2,000,000, and public liability up to RM1,000,000 plus legal fees up to RM20,000. It does not take certain trades, including jewellery or gold, handphones and accessories, antiques and Chinese medicines.
A factory or warehouse usually needs more. Easi-Biz Standard and Premier add machinery breakdown, fidelity guarantee (fraud by employees) and product liability, and Premier covers property on an all risks basis instead of named perils. Larger factories may need separate fire, consequential loss and liability policies instead; my shop and factory fire insurance guide explains how to set each sum insured.
| Cover | Shop tenant (retail, F&B, salon, tuition centre) | Factory or warehouse tenant |
|---|---|---|
| Fire and perils on renovation, contents and stock | Yes | Yes, including raw materials and finished goods |
| Theft with forcible entry | Yes | Yes |
| Plate glass | If you have a glass shopfront or display cases | If there is glass frontage |
| Machinery breakdown | Kitchen equipment, chillers | Production machinery |
| Public liability | Walk-in customers | Visitors, contractors, drivers collecting goods |
| Product liability | Food and products you sell | Products you make |
| Employer's liability | Yes | Yes |
| Income while closed | Inconvenience allowance or consequential loss | Consequential loss |
Check the limits, not just the names of the sections. Great Eastern's GREAT RetailCare disclosure sheet (valid as at 1 February 2026) illustrates a retail package with public liability of RM100,000, employer's liability of RM100,000 and an inconvenience allowance of RM500 a day for up to 180 days. If your landlord's clause asks for RM1,000,000 of public liability, that package's limit would not meet it. My public liability guide explains how to choose a limit.
Worked example: why peak stock matters
The same disclosure sheet explains the average clause: if the property is under-insured, you are treated as your own insurer for the difference and bear a rateable share of the loss. (Items insured on a first loss basis are not averaged.) Here is how that plays out for a tenant.
| Example (assumed figures) | Amount |
|---|---|
| A hardware shop tenant in Puchong insures its stock for | RM200,000 |
| Stock actually in the shop on the day of the fire (before a festive season) | RM300,000 |
| Stock damaged by the fire | RM120,000 |
| Paid under the average clause: RM120,000 x 200,000 / 300,000 | RM80,000, before any excess |
| Borne by the tenant | RM40,000 |
| Renovation worth RM80,000 that was left off the policy | RM80,000 borne by the tenant |
These are illustration figures only. How a claim is settled depends on your own policy wording and the loss adjuster's assessment.
How to check your clause and buy the right cover, step by step
This is the order I go through with tenants. It takes one sitting if you have the agreement and your figures ready.
- Get the clause before you sign, together with any fit-out rules from the landlord or building management.
- List what you will bring in, with values: renovation, machinery, equipment, furniture and stock at its highest level of the year.
- Match every requirement to a section of a policy: fire and perils, theft, plate glass, public liability limit, employer's liability, and anything else the clause names.
- Declare your real trade and how you use the premises. For business insurance, Schedule 9 of the Financial Services Act 2013 says you must disclose, before the policy is taken out, varied or renewed, anything you know is relevant to the insurer's decision, or that a reasonable person would know is relevant. Great Eastern's disclosure sheets ask for complete and accurate information for the same reason.
- Choose the basis of the sum insured. On a market value basis, wear and tear is deducted; on a reinstatement basis (new for old), repairs are paid without that deduction as long as the sum insured is adequate. Make sure renovation is included.
- Send proof the way the clause asks: a copy of the policy or schedule, and the renewal each year. If the landlord must be named, tell the insurer before cover starts.
- Diary the renewal. These policies run for 12 months and must be renewed every year.
- Tell your insurer before things change: a new trade, more hazardous storage, or leaving the premises empty. Great Eastern General's notice during the 2020 Movement Control Order reminded policyholders that some fire cover is "conditioned on the premise being occupied", and its relief did not extend to premises left empty for other reasons.
What to prepare: your SSM registration, the tenancy agreement or letter of offer, the address and type of building, a list of machinery and equipment with values, your average and peak stock, and the fire safety equipment you have, such as extinguishers, alarms and sprinklers.
Fire, flood or an injured customer at a rented shop: who claims what?
When something goes wrong in rented premises, two or three policies may respond, and each pays only its own owner. This is the usual pattern; your own agreement and policies decide the details.
| What happened | Landlord's policy | Tenant's policy | Check in the agreement |
|---|---|---|---|
| Fire damages the building and your stock | Repairs to the building | Your renovation, stock and equipment; lost income if you have that section | Whether rent is suspended, and whether the landlord can end the tenancy |
| Flood in the shop | The building, if flood is on its policy | Your contents, if flood is included (Easi-Biz lists flood with an excess of 1% of the contents sum insured) | Whether flood counts as an event beyond the tenant's control |
| A customer slips inside your unit | Usually not involved | Public liability | The indemnity clause |
| Someone falls on the common staircase | The landlord or building management, as occupier | Usually not involved | Who maintains the common areas |
| Your employee is injured at work | Not involved | PERKESO, plus employer's liability | Nothing, this is your duty as employer |
| A fire that started in your unit damages the landlord's building | Pays the landlord | Ask whether damage to the premises you rent is covered | Rent relief is usually lost if the tenant caused the fire |
The last row needs care. Liability covers often exclude property in your own care: Great Eastern's disclosure sheet for its golfers' plan, for example, lists "damage to own property or property under care" among its public liability exclusions, together with "liabilities agreed to in contracts" unless the liability would exist without the contract. So do not assume your public liability section pays for damage to the unit you rent, or for everything a broad indemnity clause makes you promise; ask for the answer in writing.
After any incident: tell your insurer and your landlord at once, take photos before anything is cleaned or moved, keep damaged stock until the insurer or adjuster has seen it, and do not agree to pay anyone before your insurer says so. The claim steps are in my shop and factory fire insurance guide.
Not sure what your clause asks for? Send it to me
I look after shop owners and small factories across Kuala Lumpur and Selangor, including Seri Kembangan, Serdang, Puchong and Cheras, in Mandarin, English or Cantonese. When a tenant sends me the insurance clause, I:
- list every cover the clause asks for, with the limits and the proof the landlord wants;
- check any policy you already have against it, including whether renovation and peak stock are inside the sum insured and what is excluded for your trade;
- if a Great Eastern General package fits, show you the schedule before you decide; if your trade or your factory needs something arranged differently, I will tell you that too;
- remind you at renewal, so the landlord gets the new schedule on time;
- help with the documents and follow-up if you ever need to claim.
If your current cover already meets the clause, I will say so. No hard selling. For the other covers a business usually needs, see business insurance for SMEs, factories and shops.
This guide is general information, not legal advice. Your obligations come from your own tenancy agreement, and your cover from your own policy wording.